Rise of Insurtech in E-Commerce industry

Over time, we have seen consumer buying behavior shift from a brick and mortar experience to a phygitial one and thanks to the pandemic, a completely digital one in order to fulfill all their needs, right from groceries to electronics. Digital and ecommerce companies are now able to provide an at-par, and in some cases, a better buying experience to the end customers. Beyond pricing and depth of offerings, consumers are looking for additional products and services that can make their buying experience better and that’s why, loyalty-based memberships, free & discounted shipping, and value add-ons are some of the initiatives ecommerce companies have successfully rolled out to drive customer retention.

As consumer preferences shift and more purchases move online, the value added services that are being offered are also going through massive innovation and one such proposition is embedded insurance - Offering relevant coverage and protection plans to consumers for the products they are buying, right at the point of purchase. How does this help and why is it important? The short answer is - cut costs while retaining a happy customer.

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Enhancing service levels for a disgruntled customer with a damaged product can spell gold for any business on multiple levels - not only does it augur trust but also better customer stickiness in a hyper competitive landscape with rapidly rising customer acquisition costs. After all, a customer with a chance of getting a product replaced or covered is more likely to be a happy customer vis-a-vis a customer with a damaged product and no solution in sight. This happy quotient is likely to make the overall brand engagement experience pleasant and ensure repeat business for the ecommerce platform.

Insurance so far was seen as an afterthought in the e-commerce world. The focus for the buyer is the product, whereas the focus for the seller is to make it available to the buyer in a fast and cost efficient manner. With rapidly shifting consumer expectations in a connected and tech-savvy environment, selling online is just not enough. Now more than ever before, creating a seamless, multichannel, and highly personalized experience is the surest way of remaining competitive. In fact, a survey by LocalCircles published in March 2021 reveals that 48% customers preferred shopping online due to the ease of return or return policy. Offering customized insurance on products and services is an ideal way to establish customer loyalty while also generating an auxiliary income stream.

Making the Insurance Elephant Dance

For some time traditional insurers have been unable to assimilate their product offerings into e-commerce platforms because of the lagging technologies and risk concerns. However, with the incoming innovation of advanced technologies such as SaaS and cloud based solutions, the complexities have been minimized and e-commerce players can harness the advantages of embedded insurance on their existing platforms with plug and play solutions.

This provides a pathway for innovation in insurance products that can be developed and creates an opportunity for exponential growth in the insurance business by moving away from traditional sales channels.

Even though the concept is not new, for example, travel insurance being bundled with flight bookings, insurance included within the purchase price, or insurance embedded with products that were previously uncovered is a novel one. Especially for products that were previously open to damage and resulted in poor customer feedback and grievance rate for the ecommerce player.

However, the process needs to match the modern demands with customizations and unique offerings and that’s where there are some insurtech players that will remain ahead of the curve. Being able to leverage technologies like AI and Machine learning to offer dynamic services, ensuring the right product fit for customers with optimum pricing and enabling ease of claims in shorter time frames are some of the advantages that a winning insurtech player can bring to the table. Some factors to keep in mind for both insurance and ecommerce players to make a winning team include:

Timing

Offering the product to a consumer when they believe they need it most is a significant aspect in enhancing the perceived value. Typically, this would be at the point of sale when the consumer is more likely to be aware of it. The insurtech industry uses technology to automate the whole process, eliminating the need for repeated information gathering. Embedded insurance providers also offer real-time dashboards with full visibility into the customers’ claims and transactions enabling timely turnaround and enhancing customer value.

Trust

Trust continues to be a driving force in the insurance sector, as well as a barrier at times. There is a clear need for ecommerce merchants to be linked with insurance that they trust, and for insurers to partner with brands that have the necessary exposure and brand loyalty. This must be integrated into the customer journey via APIs and incorporated in the point of sale. Any insurance offering from an e-commerce provider must be consistent in tone with the rest of the brand to resonate with customers and avoid friction that could lead to drop-outs. Instead of striking out as an inconvenient add-on, the whole experience should be one in which insurance is easily blended into the whole.

Hyper-Personalisation

Embedded insurance products come with the advantage that they may use customers’ data from the e-commerce platforms with which they're linked and make customized recommendations depending on the needs of that particular customer. This saves time and resources for both the merchant and the customer. Amazon comes across as the best example of this. Amazon's extended product warranty insurance is an excellent illustration of this, as it is smoothly incorporated into the transaction and customized to the exact product being purchased.

Integrating embedded insurance into the E-Commerce environment is in its infancy today, however the benefits outstate themselves with higher brand loyalty and differentiated experiences. Moreover, this pathway has opened up the possibilities for insurers to deliver innovative solutions that are more responsive to the merchant's demands by integrating insurance into e-commerce systems, making it a win-win partnership for all players involved.

Author: Kartik Poddar, Chief Growth Officer, Symbo