Insurance is changing with the rise of eCommerce, as well as with the support of ever-expanding data sets and other parts of the digital infrastructure — trends that bring consumers closer, in a way, to insurance offerings.
That was the subject of a recent PYMNTS discussion between Karen Webster and Chris Bayley, co-founder and chief innovation officer of Cover Genius. The company describes itself as a digital insurance distribution platform for eCommerce companies, allowing them to offer their customers something more secure, sufficient and even on point than extended warranties. The general idea is to offer policies tailored to the purchase at hand, with protections underwritten by insurance providers based on eCommerce data sets and other points of information.
As Webster wondered, does that concept — the idea of embedded insurance — suggest an Uber-like experience with relatively invisible or seamless transactions?
“Yes, that’s what we mean,” Bayley replied.
Of course, that also means getting as close to the eCommerce consumer as possible to be, as Bayley said, at the right place and time with the right product. As PYMNTS research has demonstrated, there are solid reasons for making the most of such an opportunity. That’s because 58 percent of consumers would be more likely to buy retail products or spend more with merchants if insurance was offered at the point of sale. That research shows a strong preference for buying insurance from specific retailers, indicating a way for those merchants to not only increase sales, but strengthen ties with customers.
The insurance offering “is formulated in the background, and created to solve consumer problems,” he said. “You tie the product sales to the warranty sales, and that flows through the consumer experience, making it really, really seamless.”
The company has relationships with numerous insurance companies throughout the world (Cover Genius operates in more than 60 countries, and in all 50 U.S. states). Data around consumer behavior on the platform informs marketing and product selection, and can lead to customized insurance offers for consumers — because, if anything, digital is an enabler of personalization, which is becoming increasingly important in the business-to-consumer relationship.
One of the main ways a company can keep its edge in this space — a space that looks likely to grow in the new decade — is by making the most of that data. For better or worse, though, such an edge tends to favor larger retailers over smaller commerce operations, according to Bayley.
“Investment in data engineering and science helps resolve [the problem] of getting insurers to underwrite our policies,” he said. “Having big [retail] partners means you get big data sets from working with those partners, plus product recommendations and optimizations. If you focus on smaller retailers, it’s an interesting business case, but it’s not going to make a lot of money for you.”
The relatively low expense of cloud computing is also key to the ongoing rise of so-called embedded insurance — and that rise could extend to other areas besides direct eCommerce, including the automotive industry, and even business optimization policies, he said. In retail, such insurance also presents the opportunity for upselling and other revenue add-ons, as PYMNTS research indicated.
Setting the pricing risk for such policies depends on a few factors, including the risk presented by different types of consumers, as well as the type of product being sold. The insurance platform must also be robust enough to serve different markets, if need be — so far, there is a lack of standardized APIs serving this part of the insurance technology landscape, Bayley noted.
That’s not all at play, though.
“People will pay for certainty,” Webster added.
Indeed, and that opportunity is driving innovation in the space, going forward into the 2020s. Insurance, as a broad industry, is at various stages of maturity regarding eCommerce and digital tools used for its purchase and operation, including disbursements. Most consumers, for instance, are familiar with offers of insurance for online travel purchases. With every passing year, automotive insurance becomes more digital and mobile. Yet, other forms of insurance are still stuck in the last century.
One can expect more disruption in this space in the coming years — people always want that sense of security, after all. However, security and certainty won’t do the whole job, either.
“Convenience is the key thing here,” Bayley said.