Insurance is not something that’s top of mind — until you need it.
Pandemics, lockouts and stockouts amid supply chain shutdowns, weather — the unforeseen is inevitable. For small- to medium-sized businesses (SMBs) in particular, having the right insurance coverage is a daunting task, PayPal’s Jim Magats, senior vice president of Omni Payments, told PYMNTS’ Karen Webster.
After all, applying for and getting coverage is a paper-laden and time-intensive process, often done in one-on-one meetings with agents. Business owners must acquaint themselves with what’s covered and what’s not, and they may not even be aware of all the risks they face as they strive to keep day-to-day operations humming.
For the underwriters, having the right data on hand to underwrite the policies effectively — and especially cost-effectively — is critical. No two businesses are exactly alike, Magats said, and micro-firms, especially seasonal ones, have special considerations when it comes to getting optimal coverage in place.
“Insurance is a natural hedge against volatility and uncertainty,” he told Webster. “There is a plethora of different insurance options that small business should be using, and can use, depending on their growth stage and industries in which they’re involved.”
“But they don’t have an idea what they should use,” he added.
Consider the rock festivals that over the past few years kept getting canceled due to health concerns. The smaller vendors — say, the mom-and-pop operation running T-shirt concessions — would have done well to have cancellation insurance in place to protect against losses. As travel rebounds, the firm hosting a business confab can face contingent events that are well beyond their control (weather and the pandemic come to mind).
Brick-and-mortar merchants face risks that online sellers don’t, but everyone is exposed to supply chain snarls right now.
Related: For Main Street Businesses, Innovation and Optimism Mark a ‘Return to Normal’
Partnering on Digital Insurance
The conversation came against a backdrop in which PayPal and Aon said Monday (May 2) they have launched a digital insurance program to help millions of PayPal’s SMB customers based in the U.S. access insurance more simply, reliably and quickly.
In terms of the mechanics, SMB customers in the U.S. shop for, purchase and manage insurance coverage through Aon’s CoverWallet solution, which in turn is being integrated on the PayPal Commerce Platform. Customers can also obtain personalized advice and guidance from Aon’s licensed insurance advisors.
The joint efforts of PayPal and Aon will give SMBs real-time insights into the coverage and costs they need, along with online quotes from several carriers. The insurance can be purchased with the SMBs’ existing accounts through CoverWallet.
“By syncing up the transaction data that we have and providing it to the Aon team, it gives almost perfect information to help underwrite those small businesses,” Magats said.
More efficient underwriting ensures that SMBs are paying what they need to pay — as opposed to being under or even over-insured, he said. Bringing CoverWallet into the system is a natural fit for the PayPal Commerce Platform, which Magats termed a destination where SMBs can see their payments information and manage refunds and payouts.
“It’s the portal that these firms use in their day-to-day activities with PayPal, and within that portal, we have the opportunity to ‘expose’ different services for merchants,” he said.
That’s the point of contact where the insurance partnership with Aon will be brought to SMBs’ attention. Clicking a link will take the SMB owner to the CoverWallet environment, the permissioned data sharing and the insurance recommendations. Magats noted, too, that the offers can be financed through installment plans.
What Comes Next
Looking ahead, he said the relationship and initiative is still in its early days, and Aon and PayPal will look to examine embedding more cross-functions between them, such as payouts done through Venmo or PayPal.
As Magats told Webster, “The broader strategy is for PayPal to continue to be a control panel for your business [where you can] manage operations beyond just payments.”
See also: Embedded Banking, Digital Payments Help SMBs Hedge Inflation, Boost Cashflow
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