With competition in the e-commerce space being so fierce, major retailers are continually exploring methods of increasing basket sizes. From advancing search algorithms to automating the supply chain, there is no limit to the new technologies e-tailers are exploring to stay ahead. However, an enlightening research report on Embedded Insurance in Retail commissioned by Cover Genius reveals many are overlooking a simpler tool to increase their AOV, LTV and boost spending - product insurance embedded at the point of sale.
The Embedded Insurance Report - Retail, conducted by PYMNTS, analyzed survey response data from more than 2,700 US consumers to learn how the option to buy embedded insurance and warranty coverage as an add-on for e-commerce sales stands to affect consumers’ spending habits. Respondents were also asked whether having the option to buy insurance for items bought online might change their spending habits if offered on future purchases.
Results revealed consumers who are offered insurance options at checkout to cover their online purchases appear willing to spend more shopping online than those who are not. 60.1% of consumers would buy insurance or warranty from their e-commerce retailers if it were offered at checkout. While 78% of customers said they would have a greater propensity to spend more online if offered warranties and insurance at the checkout, as it ensures a sense of security that their items are protected in the case something goes wrong, especially with more expensive goods.
These findings are further supported by follow up studies commissioned by Cover Genius in 14 countries on consumers’ appetite for receiving embedded insurance offers via their bank or other fintech apps. The groundbreaking Embedded Insurance Report For Banks, Neobanks and Fintechs found that 69% of consumers who made major purchases showed a strong preference for receiving transaction-based offers.
Regarding the Retail survey, the analysis indicates there’s a significant ‘halo’ effect when customers are offered warranties. Approximately 66% of consumers say that having the option to get insurance at the checkout would entice them to spend more, and even buy a higher volume of goods. This leads to an increased basket size and overall higher average order value, especially when it comes to purchases of a higher price point. 86.7% of respondents who were offered insurance with motor vehicle purchases and 48.1% who with jewelry purchases bought it.
Including an insurance/warranty offering can further boost customer engagement and overall CLTV (Customer Lifetime Value), as these protection products can be auto-renewed or set as a subscription service to ensure customers keep coming back. Data shows that once customers make a retail product insurance purchase, there is a strong likelihood of a repurchase – 82% of people who bought insurance from a retailer would buy it again in the same way in the future.