Digital Embedding Makes Insurance Relevant

It should come as no surprise that the pandemic has opened up new opportunities for consumers to consider insurance. The unforeseen, after all, might seem like it’s more a possibility than ever before — disrupting travel, health and even shopping.

With the slew of electronics and furniture that consumers have had delivered to their doorsteps over the past several months and a global increase in the desire to protect purchases in a time of heightened risk, it’s only logical that new and innovative insurance distributors would come to the fore. As Darcy Shapiro, chief operating officer for the Americas at InsurTech firm Cover Genius, told Karen Webster, distributing insurance at the point of sale (POS) can boost top lines for various players in the commerce ecosystem, including merchants their insurance backers.

For context, embedding insurance with dynamic bundling means that a business can tailor the contents of an insurance plan by adding or removing specific types of protection dynamically for their customer. In contrast, static offerings take away that flexibility.

This was a key topic of conversation between Shapiro and Webster, especially in light of PYMNTS’ Retail Product Insurance study, which found that more than 60 percent of eCommerce shoppers would buy insurance with online purchases if that option was offered at checkout. And an overwhelming majority of those who bought insurance from merchants at checkout — 83 percent of respondents — said they were “more likely” to buy insurance for future eCommerce purchases if offered at checkout.

That first point of encounter — and first impression — is critical and can set the stage for repeat business. At a high level, Cover Genius’ platform enables merchants to sell product insurance directly to customers, and it enables instant payment of claims after filing.

Amid the great digital shift, said Shapiro, the playing field is more level for big-box players and smaller firms alike. Historically, it was the big-box retailers that dominated larger-ticket items, and so they were able to “build out the insurance programs to protect the products they were offering.”

Up until eCommerce firmly took root, she said, small- to medium-sized businesses (SMBs) were simply unable to gain access to all the relevant products for which end customers would have demanded insurance to cover. At the same time, the big-box merchants had garnered so much market share with their insurance partners over the years that they were able to force prices lower through dint of bargaining power.

“Every few years, you end up seeing a race to the bottom on pricing as these RFPs go out,” Shapiro told Webster.

According to Shapiro, the digital age has enabled platforms like Cover Genius, which has relationships throughout the insurance industry, to offer what she termed “simple plug-ins” via application programming interfaces (APIs) that can be embedded into merchants’ online shopping carts. Shapiro contended that the platform model (and ease of offering insurance) also lends itself well to independent contractors and SMBs that are looking to make the leap into eCommerce, while helping customers protect the things they care about.

Such embedded offerings “will enable merchants to convert more sales of their core products and will allow for better customer engagement and experiences,” Shapiro noted, adding that the overall customer experience is about more than just having a product available. It’s also about how the product or service is enabled and delivered throughout the entire online sales process, whether it’s buying a computer, renting an apartment or hiring a contractor.

Moving Toward An Embedded Insurance Future

Offering embedded insurance can ease the process merchants must navigate as they bring new products to market — and as insurers must grapple with various state-level regulations, said Shapiro.

“Through our technology, we’ve basically been able to take the components of traditional insurance and pull out the coverages that are relevant to the customer,” she told Webster. “We get access to their data by embedding the experience into the shopping cart of one of our distribution partners, so we can make sure the products that we’re offering actually make sense for the customer.”

Context matters, and demographic differences can help determine what coverage is relevant. Shapiro noted that in the travel space, for example, a 70-year-old man traveling to the pyramids in Egypt may not need the same coverage as a 22-year-old sojourning to Miami Beach on spring break. The 70-year-old may have existing health concerns, while the spring breaker may be worried about being “dinged” money if he or she is forced to quarantine.

The platform can also extend relevant insurance offerings across multiple verticals, explained Shapiro. For example, an online retailer might see that a customer is ordering dog treats, and the retailer can then, with context, offer warranties on pet toys and pet insurance.

“From a practical standpoint, there’s no reason we can’t look at traditional products, but then bring [insurance] to people in a non-traditional way,” said Shapiro.

In a post-pandemic age, then, she said she believes insurance should be on-demand and customizable.

“There’s nothing to make people experience a ‘wake-up call’ and question how they are protecting themselves, their families and their purchases like a massive, global, catastrophic event,” she said.