Amazon has closed its UK insurance business after 2 years after its launch. Their refocus is aimed at core businesses like e-commerce, cloud computing, and advertising.
Amazon’s insurance venture offered a range of products, including home, car, and travel insurance, partnering with insurers such as Ageas, Co-op, and LV.
However, industry experts had anticipated the closure, drawing parallels with the struggles of other large brands entering the insurance space. Ranald Mitchell, director at Charwin Private Clients, noted similarities with Google’s unsuccessful foray into insurance with the Google Comparison project.
Competitive Challenges and Market Realities
Industry insiders emphasise the difficulty of breaking into new markets, pointing out that while Amazon’s brand excels in online shopping, it lacked weight in the insurance sector.
Scott Gallacher, director at Rowley Turton, stressed that the closure highlights the challenges of entering unfamiliar territory. While acknowledging that reduced choice is generally bad news for consumers, experts suggest that Amazon might have faced issues such as thin profit margins, low awareness of its insurance services, or discomfort with UK financial regulations.
Similar struggles have been witnessed with other major brands like Tesco and Sainsbury, which entered financial services but eventually scaled back and closed down those operations.
Stephen Perkins, managing director at Yellow Brick Mortgages, speculates that Amazon might have found the profit margins in insurance less favorable compared to its core business.
Insights into Amazon’s Insurance Industry
Despite the setback, Amazon continues to have a role in the insurance space, particularly in supporting small and medium-sized enterprises (SMEs) on its Marketplace platform.
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The company provides specialist online retailer insurance for more than 85,000 SMEs selling on Amazon Marketplace in the UK. This coverage includes public and product liability, stock and delivery cover, catering to the unique needs of online retailers.
For Amazon Marketplace sellers using the Fulfilment by Amazon (FBA) service, there are specific insurance requirements. Sellers with gross sales exceeding £4,000 a month for three consecutive months must have public and product liability insurance with a minimum limit of £400,000 per occurrence/aggregate, naming Amazon as an additional insured party.
While insurance isn’t compulsory for all Amazon sellers, it becomes a crucial tool for risk protection, especially in scenarios like FBA, where specific requirements must be met.
Navigating Insurance for Amazon Sellers
Understanding the nuances of insurance is crucial for Amazon Marketplace sellers. Online retailer insurance covers public and product liability, cyber insurance, employers’ liability, electronic and portable equipment, goods-in-transit, and even personal accident cover.
The insurance industry for Amazon sellers extends beyond the UK, with specific requirements for those selling in the US and Canada.
Dropshippers, a method of selling on Amazon, are also covered under online retailer insurance. The coverage includes options for sellers who do not hold their own inventory or fulfill orders directly.
However, dropshippers need to adhere to specific conditions, such as maintaining rights of recourse against a UK or EU-based manufacturer or wholesaler.
As with any insurance, there are limitations. Live animals, certain medical devices, products not meeting health or safety requirements, and items subject to legal age restrictions cannot be insured. Additionally, second-hand electrical goods, vehicles, aircraft, or watercraft are excluded from coverage.