Canadian Underwriter

Opinion: How has online shopping affected insurance?

May 12, 2020   by Lisa Smith and Chloe Beaini, Capco

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In the first of a two-part series, we look at what pushes people to buy online and how today’s digital realities push insurance towards commoditization

Insurance markets are betting Generation Z will drive the purchasing of insurance policies online.

Gen Z — those born between the last 1990s to the early 2010s — is coming of age in a world of online streaming, digital shopping and pay-for-use services. Products are being ‘commoditized’ thanks to digital solutions supporting quick compare, select and purchase capabilities.

Online purchases depend on brand familiarity, refundability and product knowledge. Markets must see goods as interchangeable with no difference to classify them as commodities.

With trends pointing towards the growth of online insurance purchases, we can’t help but ask: Is insurance an online commodity? Let’s look at the factors on which online purchases depend.

Brand familiarity

The inclination to purchase online increase if consumers previously purchased or interacted with the brand.

Gen Z insurance clients are often first-time insurance buyers. They won’t have the experience or familiarity to trust the product they purchase is right for them. The recommendations of a friend or a family member will help. However, these suggestions may not consider different backgrounds (socio and cultural tolerance), assets, and liabilities considerations.

This inexperience calls for professional advice to supplement digital marketing or product education tools.


Refundability heavily influences online purchases. Buyers, unable to experience the product beforehand, want simple returns if expectations aren’t met. When penalties for returning a product are removed, consumers are more likely to purchase.

Insurance is intangible and contractual. Penalty-free refunds are usually unavailable and most markets practice short-rating, front-loading policy fees into cancellations.

Product knowledge

People with a full understanding of a product’s value will buy those products online confidently. However, insurance is often complex and customized to consumer’s needs.

Insurers use different strategies to protect customers from diverse events. Average consumers do not fully understand their risks, assets, liabilities and ability to self-insure.

Understanding their coverage needs and the implications of different policy limits, exclusions and options on their own to confirm they’re buying optimal protection is difficult. Usually, brokers liaise between insurance carriers and clients, properly assessing the client’s risk tolerance and helping select the best options.

Without assistance, consider deductibles and limits. Consumers, looking to save on premiums, may not understand the impact of options on their financial security during a loss. Digital options often don’t replace the value of broker support.

The digital advantage

Digital does offer distinct advantages. Customers from all generations use online tools to research insurance information. Research group LIMRA found 61% of boomers, 58% of millennials and 54% of Gen X participants make insurance purchasing decisions using online research regardless of the final purchase method (online, call center or broker).

Digital online aggregators help consumers with brand and product decisions by providing research and comparison options before speaking to brokers.

Online packages offering straightforward products to specific audiences are effectively sold online. For example, product insurance caters to a specific need easily defined. Consider AppleCare or Trip Cancellation.

Additionally, online packages are effective when client needs are easily identifiable. Consider professional errors and omissions or pet insurance. Marketing can easily identify and qualify members who can then enroll online easily.

The online questions become: Can we identify and match consumer needs and product options? Can we instill confidence in online consumers that their financial future is secure with their selections? Currently, many digital options digitize existing offerings versus aligning products to online marketing approaches.

Coming up in Part Two: Is insurance a commodity? And how do we ensure clients get the right policies if they buy online?

Lisa Smith is principal consultant and Chloe Beaini is an associate at Capco, a global management and technology consultancy


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