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After the shock - insurance in 2021 and beyond

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After the shock — Insurance in 2021 and beyond 28 Big Tech in insurance: Could this be the year? For years incumbents have been concerned about the Big Tech companies – such as Google and Amazon – disrupting the insurance market. In recent years the question has shifted from "will Big Tech choose to enter the market?" to "when, and in what capacity, will these firms enter the market?" I've headlined this chapter with the question 'could this be the year?', but in reality that is misleading. What we are seeing is Big Tech firms slowly but definitively expanding their footprint with the insurance industry. The 'when' therefore is now, and even more so in the future. More interesting is the 'what'; what operating models will these large technology firms adopt to succeed in insurance? The evidence thus far seems to indicate a reluctance to hold capital – we are not seeing Google forming an underwriting agency, for example. Rather, these tech giants are operating more like the world's biggest InsurTechs – setting up agile business units that provide a very distinct service within a wider ecosystem. For example, I have previously mentioned the fact that Apple has partnered with Cisco, Aon and Allianz to provide a cyber risk service to businesses. The real competitive advantage that these firms possess is the personal data that they own. Consequently, the majority of ventures that the Big Tech companies are embarking on are focussed around the personal, health and life market segments. The emergence of wearable devices (e.g. Apple watch), connected homes (e.g. Amazon Alexa) and connected cars (Tesla) provide opportunities for Big Tech firms to feed personal data back into the insurance ecosystem, in order to personalise the pricing and add risk prevention services. Both models have been outlined previously within this report. Online platform giants can also provide a new distribution channel. For example, Amazon recently launched Amazon Protect, an offering which includes extended warranties, accidental damages and theft insurances. Amazon does not underwrite the cover (London General Insurance Company Limited carry the risk), but rather it is leveraging its existing retail client base to distribute complementary insurance policies. I predict we will see the growth of 'embedded insurance' – i.e. insurance cover embedded in the purchase journey of other products – with a focus on gadget and warranty insurance initially, but also extending to other propositions. For example, Tesla is likely to seek to embed insurance within the purchase of its cars, given the company's belief that Tesla cars are safer as a result of the huge volumes of data each vehicle produces and processes. This provides a significant challenge to insurance brokers and affinity partners, who will increasingly have to compete with tech giants that specialise in consumer buying journeys – especially in the personal, life and health segments.

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