Why Amazon May Be Interested in the Home Insurance Business

Home insurance service would complete home offerings

Shares of some insurance companies fell on reports that Amazon (AMZN) might be looking to expand into the home insurance market. American International Group (AIG) and Chubb (CB) are among the insurers whose stocks fell slightly after the Information reported on Amazon’s growing appetite in the insurance business.

The report stated that Amazon has explored offering home insurance services largely as a way to complete its home offerings, which include smart locks and doorbells. Amazon is also the leading vendor of smart speakers, which are being adopted as smart home hubs.

Why Amazon May Be Interested in the Home Insurance Business

Expanding in the financial services sector

Amazon sold 4.0 million units of its Echo-branded smart speakers in the first quarter, beating Alphabet’s (GOOGL) Google, which sold 2.4 million units of its Google Home smart speaker, and Alibaba (BABA), which sold 700,000 million smart speakers.

Venturing into the home insurance business would also mark Amazon’s expansion into the financial services sector. The company already offers a range of financial services, which include processing payments for traders on its online marketplace and supplying loans to those traders. Amazon, PayPal (PYPL), and Square (SQ) have each lent between $3.0 billion and $1.8 billion in small business loans to their customers.

Amazon in health insurance

Earlier this year, Amazon announced that it was joining forces with JPMorgan Chase (JPM) and Warren Buffett–led Berkshire Hathaway (BRK.A) (BRK.B) on a new health insurance program for their employees. Amazon has also recently been linked to plans to introduce a checking-account product aimed specifically at its customers, particularly young customers and those left out by traditional banks.

In terms of home insurance, Amazon could try to appeal to customers with cheap premiums.