Embedded Insurance Helps Merchants Avoid The ‘Protection Gap’

Whether they know it or not, consumers have been the beneficiaries of embedded insurance, a trend that’s moving beyond simple eCommerce payments and has recently made its debut in the logistics sector. Embedded insurance offers a seamless alternative to the clunkiness of traditional insurer offerings: When consumers buy high-priced electronics from their favorite online retailer or expensive flights from their airline of choice, they’re offered protection right at the point of checkout with coverage tailored to their specific needs.

InsurTech company Cover Genius has capitalized on the importance of customer’s increasing need to protect their purchases driven by the boom in online purchases and the uncertainty created by the COVID-19 pandemic. A recent survey conducted by PYMNTS found that over 60 percent of shoppers would buy insurance to protect their online orders. Still, only 41.3 percent of respondents were actually offered coverage at checkout.

And it’s not only consumers who benefit from insuring online purchases. Shipping companies and retailers also use insurance and warranty products to protect shipments and cover the cost of lost or damaged goods. But the problem with the way shipping companies purchase insurance now, says Justin Turner, head of logistics partnership for Cover Genius, is that the standard one-size-fits-all offerings lead to a “protection gap” — meaning a merchant is either over- or under-insured.

Turner explained further: In a traditional supplier-side insurance model, a retailer would purchase an umbrella policy offering coverage for all shipments for an entire year. But, as COVID brought to light, if an unexpected event occurs, the inventory ordered may not justify the coverage plan’s size. Conversely, new products or category expansion may not be covered to the extent of the initial plan.

Embedded Insurance

Just as payments can be embedded into the consumer commerce experience, insurance can be embedded into the B2B commerce experience’s logistics.

“There has been an increase in shipping platforms that are able to offer a multi-carrier service, which gives a consistency amongst the delivery process,” Turner said. “But that means you would also want to have protection that is consistent with the products that you’re shipping as well. Traditionally couriers would offer a warranty product, which may include a fixed amount, or they might offer to sell insurance at a high price — and all those offers are different. So embedding insurance across a shipping platform and eCommerce is extremely important these days.”

A case in point is Cover Genius’s XCover Insurance Distribution Platform,  which features dynamic bundling of policies from any category and underwriter while insurance licenses in over 60 countries, including the U.S., enable global capabilities from a single application programming interface (API) call. The platform was a key factor in Cover Genius’ work with Descartes ShipRush, a multi-carrier eCommerce shipping solution provider, which partnered with Cover Genius to provide a more customer-centric solution to its ShipRush customers. Together, they created Total Shipping Protection, an insurance program that combines a traditional “full-stack” menu with an API that enables merchants of all sizes to realize the value of faster claims handling, smarter pricing and customized coverage.

In creating custom insurance for ShipRush, XCover removed some of the inconsistencies that plague logistics companies like tiered pricing, exclusions on electronics and insufficient coverage limits. Total Shipping Protection also removes carriers from the claims process.

Turner says ShipRush customers who use Cover Genius’ embedded insurance can locate the relevant order on the shipping platform and file a claim with a click or two. “This allows us to bring the claim time right down to 24 hours, which is more than 20 days less than the time it would take traditional couriers,” he said.

“Our customers want to focus on core issues,” he said. “So being able to have a partner that can pay up claims in the markets in which they’re operating is going to take away completely that ancillary burden for them and allow them to focus on their core business as they grow into new markets.”