Amazon Briefing: Why Amazon is opening insurance marketplaces

In August, Amazon announced that it was adding a section to Seller Central where a mix of handpicked startups and traditional providers — namely Chubb, Hiscox, Markel and Liberty Mutual Insurance, among others — could offer product liability insurance directly to Amazon third-party sellers.

That marketplace, called the Amazon Insurance Accelerator, is designed to push more sellers to buy liability. It signals the extent to which Amazon has become a center of commerce — not just for typical consumer products, but for services of essentially any kind as well.

The opening of an insurance marketplace is probably, for now, less about any Amazon ambition to become a vendor of insurance in the U.S. than about ensuring that a wider swath of third-party sellers buy liability insurance.

For years, Amazon has stated that large third-party sellers need to have liability insurance coverage of at least $1 million. But when I spoke to Rachel Johnson Greer, managing partner of the Amazon brand management agency Cascadia Seller Solutions, in July, she said that she only knew of two instances of Amazon requesting liability insurance to verify that sellers have it. “In terms of Amazon enforcing liability insurance, they don’t,” she said at the time.

That is beginning to change. In August, Amazon, facing pressure from courts in states like California, changed its rules about product liability. Under the new system, Amazon said it will refund the costs of defective third-party products up to $1,000. But, at the same time, Amazon stepped up its rules around liability insurance.

For one thing, Amazon will only pay those $1,000 in claims if the seller has valid liability insurance. Second, whereas Amazon’s previous rule only required sellers to buy liability insurance after they have three consecutive sales months of over $10,000, now Amazon requires the insurance after they hit $10,000 in sales in just one month.

Enforcement might soon pick up, too. Greer told me this week that “considering nearly two-thirds of my clients only bought insurance when Amazon started asking for it, I would say that this was a significant gap that they just closed.”

Brian Connolly, an e-commerce analyst at Jungle Scout, said that, already, small numbers of sellers have received emails from Amazon asking to verify their insurance. In the near future, “I imagine more and more sellers are going to get emails from Amazon,” he said.

To Connolly, the insurance marketplace for third-party sellers is likely geared toward new sellers, who might not know about product liability insurance at all. “When you first start out, you don’t know everything that needs to be done when you first open a business, or maybe you didn’t read every single line in Amazon’s terms of service,” he said.

While it would be impossible to check every seller account to verify that they have proper insurance, Amazon can make it so easy for sellers that — paired with fears about toughening enforcement — they might just buy the insurance anyway. (Though policies vary depending on the product and the size of the seller, Connolly said most of the ones he’s seen are in the range of $500 to $1,000 a year.)

Notably, though, the product-liability-focused Amazon Insurance Accelerator is not the only insurance marketplace that Amazon has opened up this year. “Amazon has picked up its insurance activity in 2021 and is focusing on business insurance,” Ben Carey-Evans, an insurance analyst at GlobalData, said in an email.

Amazon has a program called Business Prime, aimed at small-and mid-sized business customers who buy from Amazon’s B-to-B marketplace. Last week, Reuters reported that in the UK, Amazon is working with an insurance broker to offer a mix of cyber and professional indemnity insurance policies to Business Prime members. Amazon is also testing a similar service in the U.S. — all to bolster its offerings to business customers.

For now, all of these insurance marketplaces in the U.S. are only promoting insurance from other providers. But Amazon also has ambitions to be a provider of specific types of insurance itself in some countries.

In India, Amazon acquired regulatory approval to sell insurance in March 2019, according to a recent CB Insights report. And starting in May 2020, it began offering free health insurance to its third-party sellers there, through a startup Amazon invested in called Acko. That insurance covered costs of up to 50,000 rupees, or around $670. Amazon followed that up in July 2020 with an announcement that it would soon sell vehicle insurance to Prime customers in India.

Philosophically, it’s notable that Amazon is now giving space on its platform to sell insurance both to its own sellers and to its Business Prime customers. Amazon wants both its own third-party sellers and its Business Prime shoppers to conduct as many parts of their business through Amazon as possible — including buying insurance — so that they become more dependent on the platform.

Amazon tests new icons to note when a product is shipped by Amazon 

Amazon is making tweaks to its product pages — so far, seemingly just on its mobile app — in order to more clearly delineate products that are shipped and sold by Amazon versus by a third party.

For the average customer, the difference between the two categories was never very apparent. Until now, details about who ships and sells each product have been buried in small text below the buy box. It isn’t unreasonable to imagine that Amazon might have gotten falsely blamed for shipping issues arising from a third-party seller, or a third-party seller might have gotten blamed for issues on Amazon.

But some people have reported that, on their Amazon Shopping apps, the small text has been replaced with slightly more prominent “Shipped by Amazon” and “Sold by Amazon” icons.

Icons might alert more customers to the fact that Amazon doesn’t oversee every product on the platform — but it still doesn’t give much additional insight for the average consumer, who might not know all of the ins and outs of Amazon’s third-party marketplace.

Amazon news to know:

• Speaking of Amazon entering every market imaginable: the company is reportedly spending $50 million a year building a smart fridge with computer vision technology (to keep track of what’s inside).
• Bolstering Amazon’s fast-growing fulfillment center and logistics footprint? A bunch of tax write-offs. Amazon has received $650 million in tax breaks this year on new buildings and leases for its logistics arm — more than any other year, at least on the logistics side.
• After years of failures and false starts, Amazon might finally have a gaming hit: New World, the computer game Amazon released this week. Early reviews are good, buzz on Twitch is high, and Andy Jassy is already claiming victory.

What we covered:

• SellerX, one of the major Amazon aggregators in Europe, appears to have acquired a review-tracking site called ReviewMeta. It might not be the last time an aggregator buys a service company — whether it’s a tech company or an Amazon marketing agency — in order to quickly build out expertise.
• Amazon (along with retailers like Target) is promoting holiday deals early this year, in a bid to get people buying before the worst of the supply chain constraints and shortages hit.
• In the last several months, BigCommerce has launched in France, Italy and the Netherlands — and it is planning forays into Germany, Spain and Mexico — in order to bolster its presence outside of the U.S.