Accenture works on service to offer insurance for online auctions

Accenture’s Technology Labs division is working on a service that would provide insurance for online auction sales like those on eBay.

A seller, for example, could buy an insurance policy guaranteeing that his laptop will sell online for $1,000. If the final sale is less than that, he’ll be refunded the difference.

Accenture is still in development with this service, but is in talks with a number of firms, including insurance companies, to market it, according to Accenture researcher Rayid Ghani. The service could query a database and automatically set insurance levels for any given product.

“We noticed online marketplaces becoming more and more important in e-commerce, so we started thinking, what are the new services we can enable with our expertise in analytics, machine learning and data mining?” he said.

The service is most directly applicable to eBay, he added, but could work for other online auction sites and possibly business to business e-markets. At the moment, the product isn’t being developed with the co-operation of eBay. A spokesperson from eBay Canada did not return calls for comment at press time.

There is already a “reserve price” feature within eBay that prevents items from being sold below a certain level that is set by the seller. But reserve prices can scare off some bidders, said Ghani.

“When we started looking at eBay, one of the things that we noticed was that the completion rate of an auction with a reserve price is much lower than without a reserve price. . . . The same thing happens with a high starting bid,” he said.

The advantage of insurance is that, unlike a reserve price, it is completely invisible to the buyer, said Ghani. Only the seller would have to know that there are conditions attached to the sale of the item.

Philip Remek, a senior equity analyst who follows eBay for Miami-based Guzman & Co., argued that there are generally enough safeguards already available to eBay sellers that an insurance policy probably isn’t necessary.

Reserve prices are generally adequate if they are used effectively, he said. “In that sense, insurance already exists for eBay.

“You would never sell something big like a car without putting in a reserve feature. I imagine large sellers have already figured out ways to protect themselves, so it seems like this would be a very limited market.”

Remek added that eBay’s “Buy it now” option is growing in popularity, negating the need for insurance. He estimates that about 30 per cent of all eBay sales are conducted with a fixed price.

Ghani said Accenture is still shopping the concept around to determine a market for it. “I think there are levels of appropriateness. You wouldn’t do it if you’re selling a USB cable for $5. For $50, I can imagine paying a couple of dollars for a premium,” he said.

Accenture’s insurance service is currently at the prototype stage with no actual production date determined, said Ghani.


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