Collectively, intermediaries have shown incredible resilience to an ever-changing landscape and have been quick to identify competitive threats and evolve accordingly.
But although the industry has done a great job of defending their trade, there’s a hole in the net that’s seeing competitive threats slip through the intermediary blockade. This has now become increasingly dangerous given the announcement of Amazon launching its own insurance proposition.
The Amazon proposition
Many are predicting Amazon’s home insurance launch is an exercise to test the water and gather data before expanding into core financial service sectors.
Although Amazon’s primary focus will be on the switcher market and therefore directly compete with aggregators models, it’s a problem for intermediaries too. Whether its aggregators or Amazon, it’s the data these businesses collect and the permissions they capture which means they know a lot about your clients and can offer products that are more core to an advisory business, whether that’s mortgages, protection or conveyancing.
All in all this means aggregators – and potentially later down the line, Amazon – can effectively leverage your unserved general insurance (GI) customers to double down and cross-sell other products using very sophisticated marketing and big advertising budgets.
The upshot is that the only reason aggregators have grown to the scale they have is because intermediaries are failing to offer home insurance consistently to their mortgage clients.
FCA assesses big tech entry into financial services
The Financial Conduct Authority (FCA) recently launched its own discussion paper looking at threats to competition and the likely outcome for consumers, coincidentally around the same time the news that Amazon had entered the insurance space was breaking, and with others that hold GI permissions, such as Apple, lurking in the background.
The FCA made clear that when Big Tech will enter financial services could probably not be predicted but they will likely expand into different industries once settled. Although they will likely work with partners to launch their propositions, as Amazon has done, it is then expected more activities, services and products will be brought in-house in the long run.
It also warned that, although customers may benefit from increased competition that drives innovation in the short-term, there are long-term dangers of huge firms generating excessive market share across parallel industries given their huge data sets and ecosystems of complementary products that will be built over time.
Your data is your key competitive advantage
But despite the challenges that Amazon will present, advisers still hold the ace card through their ‘gold dust’ data.
The deep understanding you have with your clients means you definitively know the exact moment when home insurance becomes a need. You know exactly when your client has submitted a mortgage application, when they’re offered and when they exchange.
This data means advisers sit at the interchange of a colossal information exchange between multiple parties and, as a result, can offer insurance before anyone else does – at exactly the right moment – preventing the need for that client to go elsewhere with both their data and their business.
By doing this, you will not only be expanding your own businesses and offering this essential client need, but you will be using GI as an important strategic tool that acts as a ringfence to your other offerings.
So although there is no doubt advisers will need to work hard to continue to protect their business from competition as time evolves, given it’s a solvable problem, it will force even better outcomes for customers if advisers recognise it and act with pace.
