For years, the established insurance industry has viewed insurtech start-ups as disruptors. And rightly so—they are nimble, responsive to customer needs and built on modern technology.

But there’s a difference between a disruptor and a threat. Large insurance companies still have the customers and data, so it’s unclear when, or if, these insurtech companies evolve into a true threat.

However, there’s a new disruptive player eyeing the insurance market that could hit that tipping point much faster. As giant tech companies like Tesla and Amazon enter the insurance space, how seriously should we take them? Will these companies start to take large chunks of our business, or will this perhaps usher in a new era of partnerships?

Insurtech Versus Tech Disruptors

I can’t talk about insurtech disruptors without talking about Lemonade. Leveraging the best in technology and offering convenient, online insurance policies for a lower price, Lemonade caused a lot of concern in the industry. As with most start-ups, established carriers adopted a “wait and see” approach for when Lemonade might turn into a true threat.

Lemonade is still a powerful disruptor not to be ignored, but as of today, it hasn’t made as big of a splash as we might have originally thought. In 2017, we were writing about how Lemonade might be making bigger waves within the industry and wondering how, or if, that would extend to customers. Regardless, time will tell just how much Lemonade will grow and what impacts on market share this could have on established carriers.

But now that companies like Tesla and Amazon are entering the insurance space, the threat is different. These companies are built upon technology, making them similar to start-ups. But they also have size and customer brand awareness that start-ups like Lemonade don’t have, making them even more formidable players. But how deep into insurance will these companies go?

On Their Own Versus Partnerships

Tesla is a technology company that makes cars, giving them a direct connection to auto insurance and having the technical background to do it. Because their cars are so unique, legacy insurance companies struggled with how to insure them, providing an opening for Tesla to fill.

In 2017, Tesla partnered with Liberty Mutual to offer Tesla-specific insurance. But Elon Musk grew increasingly frustrated with what he considered were high rates, and not just with the Liberty Mutual partnership, but with other insurance companies. Now, Tesla is hiring actuaries to figure out how to price, rate and develop products, meaning Tesla wants to move past partnering with insurance companies and offer insurance to customers directly.

But building an insurance company is complicated. Hiring actuaries is only one piece of the puzzle that also includes state-level regulations and writing, analyzing and servicing policies. Instead, some brands are partnering with insurance companies to leverage an already-working machine, avoiding “reinventing the wheel” and allowing them to move into the insurance space faster and for less money. Amazon is exploring this in India by partnering with Acko General Insurance to offer auto insurance.

But where Amazon is starting, Tesla is moving past. Only time will tell if Tesla’s attempt to take on the insurance industry will be successful. Elon Musk has made a brand out of going after established industries. His latest attack on insurance, while having the possibility of being formidable, also helps to position the Tesla brand as a knight fighting the stogy behemoth that’s not treating the little guy fairly. That’s likely how Musk sees it, but only time will tell the level of success.

What We Can Learn from Banking

We might learn something from looking at a similar situation in banking. Apple, Amazon and Google have all expanded into the banking sector with digital wallets and credit cards. But at the end of the day, these companies simply partnered with banks, like Apple’s partnership with Goldman Sachs.

Banking is complicated and comes with a wide array of regulatory requirements, making partnerships the more logical way forward. Now, if any companies can overcome regulatory barriers, it’s Apple, Amazon, and Google. But will they? The same question arises when thinking about Tesla and Amazon in insurance. Just because they can, doesn’t mean that they will.

Expansion in Auto Insurance

So far, Tesla and Amazon have dipped into auto insurance. But how far will they go? Tesla will most likely keep its focus and won’t start insuring other types of cars, at least for a while. Amazon is testing its auto insurance partnership in India, and it’s unclear how much of an appetite there is to tackle the deeply established North American market.

Domino Affect

Right now, many luxury car brands bundle insurance via partnerships with legacy carriers. For example, we see Land Rover offering packages through the AON broker channel to find the best fit and Porsche partnering with Mile Auto.

With Tesla and Amazon entering the insurance space, perhaps this will provide a new angle for companies like BMW or Mercedes to rethink their partnership strategies. We know there is a constant view of M&A within insurance—what if car companies decide to just buy versus partner up or even build their own insurance company?

Expansion in Other Insurance Areas

So far, I’ve talked about auto insurance. It’ll make sense for Tesla to stay within the auto insurance space, but for a company like Amazon, it might eventually start expanding into other areas. Amazon has been exploring the health insurance market for a couple years now, and it could also be a natural fit for home insurance as it becomes the center of your home technology ecosystem.

Vying for Talent

Much of what I’ve said so far is speculating on the future. Right now, we don’t know how much Tesla and Amazon will disrupt the insurance industry. But there is one thing we can guarantee right now: fighting for talent.

Part of the reason the insurance industry has been so slow to respond to better technology is due to a lack of talent. From the perspective of the younger labor market, insurance companies are not “sexy.” They come across as boring and old. But a company like Tesla or Amazon? Those are exciting companies that look impressive on a resume and offer the chance for innovation while providing unique perks and benefits. As these tech companies start hiring, it’s going to put additional pressure on legacy insurance companies to hire and retain top talent to remain competitive. To do this, carriers should focus on branding insurance as “helping the world” and not just a for-profit business model.

At the end of the day, the future is unknown. Just because we aren’t hearing about some of these larger tech companies in insurance, doesn’t mean they aren’t thinking about it. As the cliché goes, it’s not “if,” it’s “when.” And even more importantly, it’s “how.” If partnerships are the way of the future, then legacy insurance companies will have a space. But if these larger tech companies start evolving into true insurance companies, then the industry will get extremely competitive and perhaps be unrecognizable in a couple decades.

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Disclaimer: This document is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this presentation and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals.

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