The Latest Retail Upsell: Insurance At The Point Of Sale

Every merchant is looking for an edge – a way not only to make more money, but also to hit on fresh methods for building customer loyalty and trust. As we look to a new decade and as payments technology advances, eyes are turning toward point-of-sale (POS) insurance offerings for retail purchases.

And as Mitch Doust, executive vice president of the Americas at Cover Genius, recently discussed with Karen Webster, the opportunities are pretty significant. As recent PYMNTS research has confirmed, 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 those merchants can not only increase sales, but also strengthen ties with customers.

Product Categories

“Big retailers are acutely aware of the value of selling [insurance] at the point of sale,” Doust told Webster. And now, the potential opportunity seems to be reaching smaller retailers. Consumer electronics springs to mind as a leading category for such insurance, but Doust and Webster easily imagined other attractive product areas, including furniture and sporting goods.

Mind you, we are not just talking about product warranties, which are often seen as costly, complicated agreements that cause just as much consumer frustration as peace of mind. We are talking about broader offerings: actual insurance policies that even cover loss and theft.

Indeed, Apple has added loss and theft coverage to its consumer protection efforts, a sign of how consumer preference is shifting and how retailers are responding to that opportunity. “If you purchase a smartphone or a piece of jewelry, that is something that is going to be on your person as you go about your day, and then suddenly loss and theft [protection] become relevant and important,” Doust said.

And in this day and age, data and consumer behavior analysis can lead to POS insurance offers that are personalized and customized, he noted – though the differences and opportunities can vary widely depending on the product category.

“It depends on what kind of business you are in,” Doust said when asked about which insurance products might resonate with consumers as the offerings become more widespread and sophisticated. But the general goal is to craft an offer that is supremely relevant to the purchase at hand, and to take advantage of the fact, confirmed via PYMNTS research, that most consumers – some two-thirds of them – would rather buy consumer retail product insurance via the merchant instead of through a third-party operator.

Insurance Trends

“Consumers generally have a higher propensity to buy insurance products from the retailers where they are buying the actual goods rather than insurance companies,” Doust told Webster. And those retailers, in turn, can craft better, more appealing policies based on the consumer data they have collected, analyzed and put to revenue-enhancing use.

The consumer retail product insurance industry still has a long way to go. PYMNTS research found that just 12 percent of consumers have bought insurance for their products, although 41 percent were offered insurance for their most recent online purchases. (Such insurance, as Doust pointed out, can also be offered during brick-and-mortar transactions.) The research also found that just 29.5 percent of consumers who were offered insurance bought it. Those buyers tend to be younger and less educated, and earn lower incomes, than consumers who did not buy retail product insurance.

More expensive purchases tend to increase the temptation for consumers to buy insurance. In fact, consumers who bought products worth at least $1,000 bought insurance 29 percent of the time, compared to 7.3 percent of those consumers who bought products that ranged in cost from $100 to $250. Extended warranties stand as the most widely available offering, with 68.9 percent of consumers reporting being offered that product.

All of that suggests that consumer retail product insurance has a lot of room for growth, and could benefit from better consumer education of why such an offering is useful in this age of eCommerce. But as Doust said, the opportunities offered by insurance – conversions, sales, loyalty – can be applied to merchants of all scales. “The opportunity is as real for [smaller players] as it is for Amazon,” he noted.