In the USA and China an increasing number of tech companies are bringing more in house. Is this the lesson for Insurance? Insource not Outsource?

Is this a lesson for Insurance companies?

Amazon has recently been building up more and more capability to deliver bring to an end, maybe forcing the end, of their FEDEX Express contract.

What does this mean for each of them in the USA?

In the short term, Amazon will have to lean on some of its other logistics partners to fill the void left by FedEx's departure. FedEx delivered 3% of Amazon packages last year, accounting for about 200,000 Amazon boxes a day, according to figures cited by Business Insider.

In the long term, Amazon isn't going to rely on legacy logistics firms, it's going to threaten them. Amazon has been aggressively building out its own logistics unit.

This has already helped that Amazon ships more of its own products — Amazon delivered about one-quarter (26%) of the orders placed on its site last year, up from nearly zero five years ago, according to estimates from Wolfe Research cited by The Wall Street Journal.

As the company continues advancing into the logistics space via investments and new services, it will begin to threaten legacy firms for market share. Amazon even went as far as declaring itself a transportation and logistics company in its 2018 annual report.

For FedEx - not much change in the short term but longer term it could see its core business undermined as Amazon builds a Logistics service in the same way it built AWS.

Why you may ask - basically its more data and more control and more flexibility in the LONG TERM to use Tech - think here of autonomous truck.... If left with outsourced companies, Amazon would not have the data, skills and capabilities to build their own service. Bringing it inhouse means it can now automate at its OWN pace and transition the business very effectively. And this is kinda what it did with AWS - built up a core business for itself and then resold it to everyone else.

Lessons for Insurance? What can the an insurance company do?

  1. Bring core services in house.
  2. Automate those core services
  3. Roll out across entire business
  4. License to smaller companies

This means getting on to the innovation path, investing internally, investing in IP, investing in new process all with the aim of automation and productivity.

Further Reading

AI & Insurance

The Uber Opportunity

The digital insurer Microinsurace.

Posted in InsurTech blog, MicroInsurance blog on Jun 15, 2019