FINTECH: Why Amazon beats Google for Insurance Aggregation

Just last week we discussed the industry's anxiety about Facebook reaching for the datasets of traditional banks. This week, it's Amazon again. The claim is that Amazon is considering setting up a comparison shopping site in the UK for insurance products. Given the recent rise of aggregator insurtechs like WeFox, as well as the web arbitrage of lead gen websites like GoCompare and Moneysupermarket, there seems to be a reasonably defined opportunity to mess with financial product distribution. In the US on the lending side, LendingTree and Credit Karma had carved out hundreds of millions of revenue intermediating such sales. 

So what's Amazon's game? Critics enjoy pointing out that Google had tried to do comparison shopping multiple times across financial verticals, and failed. Very little remains of their personal finance efforts. But this point betrays a misunderstanding. As a financial product manufacturer, like say insurance provider Admiral (who would love to be on the Amazon platform, thank you very much), you face a fat customer acquisition cost. Let's say this is $300-800 per client, from insurance, to mortgages to investment management. You will pay this to get the client. Right up the marketing funnel is the price comparison platform, which will get paid $50-100 per lead by the financial institution, which remember still has to close the lead at some conversion rate. Your job as a lead generator is to arbitrage the willingness to pay by the financier versus the search engine algorithm discovering an audience's interest in a financial product. So if you pay $5 to get traffic to your site, and then convert those effectively into leads to sell off, you make money. 

The search engine price comparison (e.g., Google), however, is competing with itself and the advertising spend of intermediaries. That revenue per user is the opportunity cost. If Google can monetize search intent through advertising to intermediaries better than through selling leads to manufacturers, then it should exit the leads business. And a bunch of techies probably don't know how to optimize for selling insurance. But Amazon is different. Amazon has no opportunity cost from advertising revenue in its platform, all the while facing much lower customer acquisition costs. Because the customer is already inside of Amazon.

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Source: Amazon Looking at Insurance (GuardianDigital Insurance), Images from Moneysupermarket and Google Shopping