Retail Product Insurance: Driving Higher Sales With Greater Trust

The impulse to protect purchases runs deep, as does brand affinity (aka trust) in our favorite online retailers. This combination can make insurance coverage a natural extension of certain buyer-seller relationships – and some verticals like appliances and other big-ticket consumer goods have turned point-of-sale (POS) product insurance into a lucrative sideline. Others in a position to do so haven’t – and they may be missing an opportunity for raves and revenues.

Delving into the topic in-depth, the latest PYMNTS Retail Product Insurance Study surveyed close to 3,000 U.S. consumers and found that six in 10 would insure purchases at the point of sale if given the chance. And almost the same number (62 percent) report being offered the option to insure at the POS, suggesting that there’s plenty of room to grow this into revenue stream.

If only things were that simple. Consumers have their own ideas about what products and price points deserve extra protection, as well as where in the transaction path they want to encounter insurance. This much is clear from the new research: Nearly half of respondents said they would buy more and spend more if offered the peace of mind from insuring it the right way.

Better Safe Than Sorry

We’re accustomed to being offered insurance at checkout when we rent a car, book a plane ticket or purchase a new mobile phone. People often decline those coverages and regret it later. Yet research shows that people do want the protection – if it comes from the right place.

Particularly compelling is the finding that consumers would rather buy product insurance from trusted eCommerce brands, and not from the third-party insurers to which eTailers often outsource such programs. Consumer sentiment in this area is eye-opening, with the study finding that:

• 4 percent of consumers would simply buy more stuff if they could insure it at the POS
• 2 percent would pay more for items they can insure at checkout
• 7 percent would both buy more and pay more if given a POS insurance option

The effect amplifies after a consumer purchases POS insurance just once. The study finds that almost 83 percent of those who recently insured a purchase through an eTailer report being likely to do so again. That’s particularly true for high-end purchases like gems and cars, with about 30 percent of respondents insuring items valued at $1,000 and higher. Compare that to items priced from $250 to $500, where just 12 percent of consumers said they chose to insure if offered.

Of respondents who recently bought a car online, 45.2 percent said they were offered insurance by the dealer – and a whopping 87 percent bought it. That’s even higher for emotion/status purchases like jewelry – over 48 percent of those who recently bought a pricey bauble online were offered insurance, and very nearly half (48 percent) took it.

The Good ‘Protection Racket’

The leading types of insurance to be offered with online purchases are pretty much as expected: Extended warranties are nearly 70 percent of the market, followed by damage during shipping (21.5 percent), theft (10.5 percent) and travel insurance (10.3 percent).

What might be unexpected are findings that almost 83 percent of consumers who were offered the chance to insure a purchase directly with the eCommerce site did so at checkout. Also consider that over 55 percent of respondents were not offered insurance at the POS.

Protecting a wider range of eCommerce items with retail product insurance would appear to be on the horizon, as eTailers digest the fact that their loyal shoppers will buy more and pay more if they have the option to protect those purchases right at the POS. It lines up as a unique opportunity for online merchants to add consumer assurance and a new revenue stream.