What are shoppers really paying for? Experts call out shipping insurance add-ons at the online checkout

With just a few clicks, online shoppers fill their cart with items. But before they can enter their payment details they’re hit with last-minute cash grabs featuring everything from recommended add-on products to pop-ups alerting them that if they spend another $30 they qualify for free shipping. Now shipping insurance is quietly appearing at the checkout, promising to better protect parcels for just a few extra dollars. Touted as a necessary add-on, it’s being criticised by business owners and experts who say it’s merely a dressed-up junk fee. Australian consumer law states retailers are responsible for goods purchased from them until they reach the customer. If a product is lost, damaged or stolen, they have to investigate the issue and provide a reasonable solution that could include a refund or replacement, regardless of whether shipping insurance was purchased. But Jeannie Paterson, professor of law at the University of Melbourne and director of the Centre for AI and Digital Ethics said most shoppers aren’t clued up when it comes to what’s covered. “They (consumers) don’t know their rights under consumer law, so they think they don’t have that protection if they don’t opt in for it,” she told The Sunday Times. But Professor Paterson said if nothing else shipping insurance does provide one benefit that goes beyond the law — peace of mind. “What it does mean is if the goods don’t arrive then you don’t have to have an argument with the seller about whose responsibility it is, even though you’re covered regardless,” she said. According to an Australian Competition and Consumer Commission spokesperson “businesses offering these products and services should be clear about what these additional products or services, such as shipping insurance, provide consumers above their existing statutory rights”. But this is seldom the case. Insurance is often subtly tacked on at the bottom of an order, sometimes as an automatic add-on, meaning customers must deselect if they don’t want the service. Some websites offer protection through a third-party service while others appear to use a self-managed system. Price and terms also vary widely across retailers, with little to no transparency about what’s being offered. Professor Paterson said it was “problematic” when insurance is automatically added at the checkout. “Most behavioural studies show that by the time consumers get to the checkout they’re committed to the product, they think they know the price so they’re not necessarily conscious that there may be other add-on prices,” she said. She refers to these features as “dark patterns”, manipulative tactics designed to persuade customers to make purchases they may not fully understand or didn’t intend. “It’s a default they either don’t notice, or they think, ‘Oh, I better take it because it’s been offered to me’,” she said. Professor Paterson thinks some retailers are taking advantage of unsuspecting customers, while others are ill-informed and believe it’s in their customer’s best interest. The latter rings true for Perth-based clothing brand StreetX. Operations manager Will Hart said the business experienced an “uptick in delivery issues” in 2020 after a surge in online orders during the COVID-19 pandemic. Insurance service Route was added to the website as an opt-out feature in a bid to streamline the returns process for customers after lengthy claim delays were experienced with Australia Post. The service, used by 13,000 big-name brands across the globe, covers lost, stolen, or damaged items for a fee paid by the customer. Mr Hart confirmed the money goes entirely to Route. Some StreetX customers have been caught out paying for the insurance without realising it. Mr Hart has been contacted by people who questioned the fee after noticing it on their receipt. He said after explaining the feature, they were happy to have paid for it. Mr Hart said it’s automatically applied to cover the business and “most importantly to protect the customer”. He assured that all delivery issues are chased up, but StreetX does not compensate for problems that arise at the hands of the courier — this is where Route comes in. “If we delay the order delivery by nine days, or a T-shirt arrives with a hole then of course we are going to compensate because it’s the fault of ourselves,” he said. “But we are not going to compensate for things that are lost at the fault of someone else. “With Route, you’re going to get a better outcome, you’re going to get the exact same items that were lost, or the exact retail amount of your order, including shipping fees as well.” Professor Paterson said business owners should educate themselves before handballing their statutory obligation. “Ignorance to the law is no excuse and they (retailers) should go and find out who is responsible,” she said. “If they are worried about their couriers not acting properly then that’s a matter for them and they should be taking out the insurance with the courier.” Lucy Keig, founder and design director of Sydney-based clothing label Patience Made, has never offered shipping insurance to customers. Charging shoppers for a “potentially pointless” feature doesn’t sit well with her. “I did a bit of research and found customers paying around $5 for ‘insurance’ didn’t necessarily protect the customer or the business owner,” she said. There hasn’t been any demand for shipping insurance from Patience Made customers, and Ms Keig has no plans to introduce it. Professor Paterson thinks new rules are needed to ensure customers aren’t taken advantage of. “I think it would be great if the ACCC put up clear guidelines and an information campaign, so consumers are aware of this add-on and don’t fall into it,” she said. “We probably need a prohibition on unfair trading which deals with dark patterns that nudge or sludge consumers into buying things they don’t need or aren’t in their interests.” Ms Keig agreed that changes need to be made. “More information needs to be provided to the customer at checkout to explain what this additional money actually covers,” she said. “I’m not sure asking the customer to insure their order is the solution. Maybe we need to look at postage options in Australia to better support infrastructure for ecommerce.” The ACCC urges consumers to find out what’s being offered before they purchase shipping insurance and to raise any issues about their parcels with businesses directly. “If there is a problem with a courier or mail delivery service for a product purchased online, consumers should first raise the issue with the online business they purchased the product from,” a spokesperson said. “If the issue can’t be resolved, consumers should contact their local state or territory consumer affairs or fair-trading authority who may be able to assist consumers with their dispute with the business.”

What are shoppers really paying for? Experts call out shipping insurance add-ons at the online checkout

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