This article was originally published in the Australian & New Zealand Institute of Insurance & Finance (ANZIIF) Journal (Issue 4, Dec 2020)
The insurance industry is going through a period of transformation.
While investment in insurtechs may have dipped due to the COVID-19 pandemic and the resulting uncertainty in global markets , insurance products and distribution channels have continued to evolve.
McKinsey & Company reports that personalisation will drive the marketing of products and services in the next five years .
Shopassurance might be the industry’s answer to consumers’ demand for more personalised insurance by changing the way we buy insurance forever. But like most new technologies, there are some issues to think through before we all ‘opt-in’.
A MORE PERSONALISED SHOPPING EXPERIENCE
Shopassurance makes the annual ‘grudge’ purchase feel like a more common affair.
Adding insurance to existing sales channels for other products and services, whether online or in-store, allows the insurance purchase channel to be customised with a particular look and feel that customers can come to recognise.
For the retailer, this promotes conversion and brand loyalty. It is no wonder supermarkets, an essential and familiar part of the landscape for customers, are now selling insurance. In Australia, Coles and Woolworths have joined in while Tesco in the UK has a similar offering.
Shopassurance providers are also able to use data they hold about their customers’ buying behaviours and preferences to market insurance products.
Understanding this data can be challenging and require specialist expertise, however, if its potential can be unlocked, data can create significant competitive advantage for the retailer.
Data-driven decisions play a significant part in optimising insurance conversions.
According to the 2018 World Insurance Report, 47.5 per cent of tech-savvy consumers were open to receiving proactive insurance offers .
Where unlocking data achieved insurance offers that were correlated to life events, consumers reported significantly higher positive experiences with that provider .
Changes to Australia’s hawking laws are proposed to apply to insurance products in 2021 . The changes will prohibit the unsolicited sale of insurance products.
Other reforms include a proposal to defer the sales of add-on insurance products. While it is likely shopassurers can continue to advertise insurance, more personalised targeting, where immediate responses are demanded, may be subject to greater scrutiny.
A MORE PERSONALISED INSURANCE PRODUCT
As well as delivering a more personalised shopping experience, shopassurance can also create a more personalised insurance product, whether it be through specific coverage options or more accurate risk-based pricing.
This is made possible through data held by the retailer, and with time, this data can be interpreted in conjunction with claims experience.
Shopassurers are generally not risk carriers. Instead, they partner with licensed insurers. As such, they may be limited in their ability to customise products without a cooperative and entrepreneurial insurance partner.
As an example, an electric car manufacturer could share information about a driver’s driving habits and style with the insurer, providing valuable information which can be used in assessing a driver’s risk for car insurance.
Interestingly, grocery purchases have also been linked to car insurance risks. Those who fill up their petrol at night and are more frequent consumers of spirits are reportedly less favourable insurance risks .
Insurers who are open to playing around with their product will be more successful shopassurance partners for retailers.
In turn, insurers can reap the rewards of tapping into the data held by customers to better understand the risk insured and the claims experience, as well as driving the profitability of the portfolio by delivering customer-centric policy coverage.
For customers, it means obtaining better value for their insurance purchase.
JOINING IN ON THE FUN
Worldwide research suggests that almost a third of the population is interested in purchasing insurance from technology companies including large online retailers such as Amazon.
Investigations by the World Insurance Report found that between 2016 and 2020, consumers have become more open to purchasing insurance products from large tech companies .
In 2016, only 17 per cent of customers were willing to purchase insurance from tech companies. In 2020, this figure is now at 36 per cent .
With almost a third of the population willing to purchase insurance from technology companies, it is perhaps no coincidence that technology giants Amazon and Alibaba have launched their own insurance offerings in the past few years.
Alibaba launched its online insurance platform on Alipay, the world’s largest mobile payments platform, in 2016.  and in March 2019, Amazon acquired an insurance agent licence in India .
Chinese tech company Tencent also launched an insurance offering, WeSure, in November 2017, insuring 25 million customers by the end of 2019 .
A NEW INSURTECH VERTICAL
Looking more broadly, increased interest in shopassurance has created opportunities for a new vertical within the insurance industry which is creating new jobs and attracting new talent.
A number of insurance technology companies now specialise in assisting retailers to become shopassurers.
Two Australian examples are start-ups Insured By Us, which specialises in travel insurance, and Cover Genius, which specialises in add-on insurance during the retail checkout process.
Using a specialist company can assist retailers to launch more quickly. These companies provide assistance with implementing the technology on the retailer’s website.
They also play a role in connecting retailers with established insurers who underwrite the risk.
PROS AND CONS
While shopassurance can create many benefits for consumers, the resulting granularity of risk selection could potentially lead to adverse implications for society, including the inability to access insurance for some and an insurance gap for those who may need it the most.
Analysis undertaken by the Actuaries Institute suggests that as more data is used, a significant number of individuals who are currently paying a premium correlated to the ‘average’ risk will be able to pay a lower premium .
However, those who do not consent to sharing data with the insurer, or where the data shows they are higher risk, may be required to pay a higher premium.
The result of the Actuaries Institute’s analysis is depicted in the diagram below with a larger number of people grouped in the red high-risk zone.
The axiom that insurance involves the sharing of risk is still correct, but the sharing of risk is more correlated to each individual’s contribution to it in the pool than currently possible.
Source: Actuaries Institute, The Impact of Big Data on the Future of Insurance Green Paper
A higher premium may make insurance unaffordable for some, meaning they may switch from being insured to uninsured, increase their excess, or reduce their sums insured.
This means they are likely to suffer financially if a claim event ever occurs and are more likely to require support from public services, which could mean a strain government resources .
An additional concern is that the data being used to justify a higher premium may be inaccurate due to a faulty IoT device or a mismatch of information in the public domain, for example.
It could then be highly challenging for the consumer to navigate the processes of making the discovery in the first place, through to obtaining the specific data utilised by the insurer and having the record corrected.
QUALITY OF LIFE
Unaffordable insurance can reduce the quality of life for individuals classified as ‘high risk’ because they may be reluctant to participate in certain activities as a result.
For example, a person with multiple medical conditions may not be able to obtain travel insurance which covers claims arising from these conditions.
While this divide already exists, the Actuaries Institute predicts it will become more prevalent as more risk factors are identified and insurers are able to underwrite using an individual’s specific risk rather than classifying individuals into risk groups.
While products can be segmented to cater for particular risk profiles and specific coverage terms can be employed, there are also several options available to governments to address this public policy concern.
The Actuaries Institute believes that the government may choose to act as an insurer of last resort  by forcing insurers to share the risk of high-risk individuals between themselves.
Governments could also amend current anti-discrimination legislation to regulate for the use of certain data points and review the exemptions in place for insurers.
This kind of scenario will require great caution to ensure the continued viability of insurance — which is an industry based on risk analysis and selection — and reliant on product development for its growth.
TO SUM UP
The emergence of shopassurance channels around the world might prove the answer to consumer demand for more personalised products and services.
With the right product and vision, shopassurers and insurers can unlock the potential of this unique sales channel.
However, insurers, their business partners and policymakers must strike the right balance when using data within such arrangements to ensure they continue to deliver positive consumer outcomes as this distribution model matures and evolves.
Tim Chan is an insurance & insurtech lawyer at global law firm Norton Rose Fulbright and Founder of The InsurTech Lawyer blog. He regularly advises insurers and startups on emerging legal issues affecting the industry. Follow Tim on Twitter: @timinsydney
 Forbes, ‘InsurTech Funding Roundup, Q1 2020: investors reduce risk as the COVID-19 induced downturn settles in’ <https://www.forbes.com/sites/forrester/2020/05/01/insurtech-funding-roundup-q1-2020-investors-reduce-risk-as-the-covid-19-induced-downturn-settles-in/#7d4dd4a8125c>.
 McKinsey & Company, ‘The future of personalisation – and how to get ready for it’ (18 June 2019 <https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-future-of-personalization-and-how-to-get-ready-for-it#>
 Capgemini and Efma, ‘World Insurance Report 2018’ (2019), 21.
 Ibid 19
 Australian Government, ‘No Hawking of Financial Products’ <https://treasury.gov.au/consultation/c2020-48919i>.
 Natash Wallace and Sara Whyte, ‘Supermarket spies: big retail has you in its sights’ (16 September 2013) < https://www.smh.com.au/technology/supermarket-spies-big-retail-has-you-in-its-sights-20130914-2trko.html>.
 Capgemini and Efma, ‘World Insurance Report 2020’ (2020), 10.
 ASEAN Today, ‘Alibaba’s Entry into the Chinese Insurance Market’ (16 November 2017) <https://www.aseantoday.com/2017/11/alibabas-entry-into-chinese-online-insurance-market/> ; John Heggestuen, ‘Alipay overtakes PayPal as the Largest Mobile Payments Platform in the World’ Business Insider (12 February 2014) <https://www.businessinsider.com.au/alipay-overtakes-paypal-as-the-largest-mobile-payments-platform-in-the-world-2014-2?r=US&IR=T>.
[10 Moneycontrol, ‘Amazon India, Flipkart preparing to enter India’s Rs 35000-crore online insurance market (19 March 2019) <https://www.moneycontrol.com/news/business/amazon-india-flipkart-preparing-to-enter-indias-rs-35000-crore-online-insurance-market-3664141.html>.
 ‘Tencent’s insurance platform WeSure celebrates its 2nd anniversary; 55 million users within WeChat ecosystem’ <https://www.prnewswire.com/news-releases/tencents-insurance-platform-wesure-celebrates-its-2nd-anniversary-55-million-users-within-wechat-ecosystem-300973842.html>.
 Actuaries Institute, ‘The Impact of Big Data on the Future of Insurance Green Paper’ (November 2016) < https://actuaries.asn.au/Library/Opinion/2016/BIGDATAGPWEB.pdf>.
 Ibid, 25.