Amazon Mulls Offering Home Insurance

With Amazon.com, Inc. (AMZN) expanding the number of smart home devices powered by Alexa, its voice-activated digital assistant, it is eyeing the home insurance market as a complementary service.

CNBC, citing a report in The Information, said that with smart homes growing in popularity and with Amazon a leader in that space thanks in large part to its Echo line of speakers, it sees home insurance as an area it can disrupt. Details were scant as to how Amazon would enter the market but the idea is that Amazon would lower the cost homeowners pay for insurance. CNBC pointed to a Insurance Information Institute report from 2016 that showed more than 30% of people with homes find homeowners insurance to be a burden financially. The average monthly premium for homeowners insurance is more than $1,000, noted the report. With Amazon selling home security devices and other smart home gadgets it could provide customers with a discount if they use its products. (See more: America Has Become the United States of Amazon.)

While industry watchers expressed skepticism that Amazon could easily enter the home insurance market and undercut insurers, it does have something that could be enticing for insurance companies: data. Amazon’s connected home devices collect a lot of data which could be used by the insurance industry to gain new insights into how individuals behave in their homes and neighborhoods. Down the road, the connected home devices could provide data to insurers that enables them to be proactive instead of reactive. For instance, it could be able to detect if a home is too cold and a pipe will burst and automatically increase the heat. That could prevent a costly claim saving insurers money.

Home insurance isn’t the only area of insurance Amazon is eyeing. (See more: Amazon Hits New Highs After Revealing Health Care Plans.)  Earlier this year the Seattle, Washington e-commerce giant announced it was hooking up with Berkshire Hathaway (BRK.A)  and JPMorgan Chase (JPM) to create a new healthcare company that will provide affordable and transparent healthcare to their employees in the U.S. Currently the three companies are in search of a leader to head up the initiative that is being called ABC. Initially, the companies were going after health policy and insurance experts but has shifted the focus and is mulling candidates who have more of an entrepreneurial background and are not closely tied to drug supply companies and health plans, reported CNBC in May.