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Despite Looming Naysayers, Amazon Home Insurance Ready for Launch

Amazon, the company that keep on winning, is at it again. The tech giant is said to be seriously considering making forays into the insurance game with a product of their own. After initiating plans to disrupt the health insurance, Amazon is now looking to make full utility of its line of smart home devices powered by Alexa.

In recent years, smart homes grown in popularity. The stats show that in 2016, more than half of homes in the United States were smart. Berg Insights put the numbers at 21.8 million households

Given the fact that Amazon is a tech titan, it makes perfect sense for them to seek new avenues to expand. However, critics have been quick to point out that they may have to do their homework in order to truly penetrate and change the insurance industry.

According to Lynne McChristian, the director of disaster response and a Florida representative for Insurance Information Institute, insurance is not a commodity that one can put in a box and ship. This is because it is one of the most regulated industries in the United States.

Those in the know believe that for Amazon to establish themselves as insurance industry leaders, they would have to set up shop and work with regulators from all states. This is of essence because most states have their own unique takes on matters home insurance. Normally, new insurance companies are known by establishing themselves in one state before expanding to all the others.

Deterrents

Regulations aside, financial backing is another well known barrier to those seeking to venture in insurance

McChristian shared that insurance is a tricky business because one ideally needs to have the monies upfront to pay up anticipated claims. She added that it was not feasible for anyone to start that kind of business without really knowing where that kind of money is likely to come from. For Amazon to commit themselves to this kind of business venture, it would mark a significant change in tact.

While funding is a likely issue, Amazon can offset this challenge by reducing operating costs. At present, the company already markets a number of smart home devices as time and money savers. In order for the to really announce themselves to the industry, they could try undercutting other insurance companies on price.

A report shard by the Insurance Information Institute significantly showed that in 2016, about 30 percent of homeowners considered homeowner’s insurance cover as an added financial burden. In most states, the average monthly premiums for homeowner’s insurance cover is above $1,000.

Michelle Megna, the managing editor of Insurance.com, seems to not believe that undercutting would deliver the masterstroke Amazon needs to take on the market by storm. Megna shared that the home security discount one would get from having Amazon home monitoring devices would not be too varied from options availed by other home insurance companies.

Products

Data released by the Insurance Information Institute has shown that between 2012-2016, the most expensive claims were related to incidents like fire and lightning, body injuries and property damage, wind and hail, water damage, and freezing

From a general outlook, analysts believe that Amazon is currently only well suited to handle the less reported incidents. Their smart home products able to detect and monitor fraud, theft and property damage with relative ease.

Matthew Griffin, the founder and CEO of the 311 Institute of London, believes that Amazon is likely to up the game in the insurance industry once they really break the ice. This is because insurers are likely to start use smart devices to aggregate data together and receive better insights into the behaviors and patterns of individual neighborhoods.

Going forward, many expect that connected home devices and the data they provide will be of great essence to insurers keen making the move from the current reactive model to a much more proactive one.

Effectively, this means that insurance companies will be able to detect problems even before they arise, and fix them. The capability to avoid risk is likely to create a paradigm shift in terms of abilities and the nature of their business model.

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