Amazon, already a giant in online retail, may be secretly brainstorming how to offer home insurance to its millions of regular customers.
The unconfirmed report caused a momentary dip in the stocks of several insurance companies.
The news, yet to be confirmed by the company, was reported by technology business news website The Information by an anonymous source.
“Amazon.com has contemplated offering home insurance as an offshoot of its development work on robots and other connected devices for the home, according to a person familiar with the discussions,” wrote The Information’s Priya Anand.
The thinking behind Amazon’s possible moves into the insurance world is the maximizing of its home technology offerings.
The advent of smart home devices, like voice-interactive Amazon smart speakers Echo and Alexa, can allow consumers more control of their homes.
Consumers can monitor their homes via smart sensors, smart speakers, cameras and automation to guard against fire or burglary for example.
Amazon even offers smart locks and doorbells for consumer purchase.
Such improved digital vigilance could affect actuarial statistics and lower the damage risks associated with home ownership in the future.
All that said, Anand also specifically wrote that Amazon doesn’t have “any concrete plans for insurance.”
Yet the mere suggestion that Amazon might get into the insurance business sent shockwaves throughout the insurance stock trading sector.
Insurance stocks dip
The stock shares of several prominent American insurance companies fell slightly on the same day of The Information’s report.
The share dips were momentary and rebounded some time after The Information’s report.
Investors may have been shaken by Amazon’s possible move because the insurance industry is incredibly lucrative.
According to the National Association of Insurance Commissioners, $92 billion in revenues from premiums was generated in the United States and Canada in 2017.
Some experts believe that the news is much ado about nothing.
The insurance industry won’t be easy for Amazon to break into, despite brand name recognition.
Existing insurance companies have decades of experience, actuarial data, consumer loyalty and more logistical experience.
Also, significant natural disasters could create earnings volatility for Amazon during claims generation.
Josh Esterov, an analyst at CreditSights Inc., concurs.
“I’m probably a bit skeptical about this. I would be very surprised if this is the type of industry they want to get into,” said Esterov.
Deutsche Bank AG analyst Joshua Shanker doesn’t believe Amazon wants to deal with regulatory restrictions.
“Does Amazon really want to get regulated? I don’t think they do,” said Shanker.