“There is a true complementarity between insurance and retail”
Patrick Raffort, President of the FG2A* is also Head of Insurance at Orange. He explains how insurance products have become a new frontier for many retail companies.
Mind Retail: More and more retailers are interested in insurance products. Why is this?
Patrick Raffort: Our members at FG2A are retailers, insurers, brokers and service companies. For the last 18 months there has been an acceleration on the part of retailers to set up dedicated insurance products. Today, many retailers want to complete their offer with these insurance services, specific to their sector and with high added value. There is a real complementarity between insurance and retail.
Mind Retail: How big is this market and who are the players?
Patrick Raffort: In 2021, out of a €20 billion insurance market for affinity products in France, between €3 and €6 billion will go to retail. I have many examples to quote: for instance, Back Market offers customers a guarantee that reconditioned appliances will work, plus breakage and theft. Micromania offers specific guarantees on consoles as well as Buy Back programs (purchase of the product after a given period at a guaranteed price). Vinted offers a buyer’s guarantee, which makes sense in a C-2-C model. If a customer does not receive an order, they are automatically refunded. Sport 2000, by offering insurance on skis, covers customers in case of damage and theft and can include coverage in case of cancellation or interruption of stay). As another example, Brico Depot insures all household appliances with no time limit. Some go even further. In France, Ikea offers comprehensive home insurance, competing with banks. It’s a real extension of brand territory!
Mind Retail: Who are your partners for retail?
Patrick Raffort: In terms of the organisation chart, it is most often the financial or commercial heads. Regarding the implementation of insurance contracts, the legal department takes over later. In terms of networks, these insurance services are required by both e-commerce and store networks. These arrangements affect almost all retail sectors: electronics chains (5-year or even lifetime guarantees), furniture stores (snag, stain and tear guarantees), optics and hearing aid practitioners and bedding companies (90-day trial offers). For personal goods (fashion, shoes), trade-in guarantees based on second life and circularity can be of interest to everyone. Low-price fashion and personal care retailers (such as hairdressing or manicures) are less active in this sector.
Mind Retail: How do these services generate value?
Patrick Raffort: They allow retailers to nurture a customer relationship with a tailor-made offer. For example, Buy Back programs encourage customers to come back to the store with returned products and then spend again. In the airline industry, Emirates is a textbook case: at the beginning of the Covid-19 (1st semester 2020), they covered quarantine costs and included hospitalisation guarantees in airline tickets up to €150,000. This has become a competitive differentiating element of their offer, which wins news customers. For a retailer, insurance generates additional revenue and has an immediate impact on the operating result. The net margin for the retailer varies between 15% and 30% with this services. This is much higher than standard profitability in the retail industry.
What are your priorities for 2022?
Patrick Raffort: We want to go further in understanding needs of consumers. What does the customer want for each retail vertical – i.e. home electricals, electronics, home and furnishing, Do It Yourself, fashion, travel, sports, property or food. To me, Ikea’s strategy is particularly interesting as they could have been satisfied with guarantees on their products, with a furniture Buy Back offer. However, the Swedish retailer considered that they were able to offer home guarantees, going beyond their brand scope. It was a daring gamble and successful. As illustrated by the unbridled development of marketplaces, brand territory extensions can go very far for retailers.