Online retail insurance – expert Q&A
What do online sellers need to know about insurance?
The number of individuals and businesses selling products online has exploded in recent years. Whether you're a side hustler selling home-made products on a platform like Amazon or eBay, or a retail business with your own online store, there are a diverse range of risks that you might be exposed to.
We sat down with our in-house expert, Portfolio Underwriter Jake Hales, to answer the key questions about insurance and help you understand all you need to know about the protection provided by Superscript's unique online retailer insurance.
You can also find out how we help online sellers and learn more about the range of covers we offer with our tailor made ecommerce insurance product.
Why should a business consider purchasing online retailer cover?
For me, the reason to take out insurance is for the peace of mind you get from knowing that you’re protected against loss or damage to your property, or if you’re found to be negligent in the course of your business. Accidents can happen, but having the right insurance should be straightforward and should be catered for your needs.
How has the market for online retail insurance changed in the last few years?
Over the years the market has had to change as more and more people are selling products online to help with the cost of living.
Historically there hasn’t been a specific insurance product that is tailored for the needs of an online retailer and these risks have been placed under a commercial combined or a shop policy which really aren’t suitable.
Our product has been built to cover dropshippers which has been a difficult area for insurers to cover as the customer will normally be selling the product direct from the manufacturer or wholesaler, and these are often based in China or Taiwan.
What type of business within the ecommerce space is online retail insurance most popular with?
Over recent years customers have found ways to make money selling products via various marketplaces, whether they are making the product themselves, adding their own log or packaging to the product or buying items in bulk. In all of these scenarios, a business might wish to consider having insurance in place.
What is the biggest risk of not having cover for an online retail business?
The biggest risk can vary depending on what you’re selling or where your customers are that you are selling to. For a jewellery maker, you could have a large amount of valuable stock which has a low risk of causing injury or damage to a third party but could be seen as attractive to thieves. In this scenario the biggest risk of not being insured would be losing your valuable stock in the event of a theft at your premises.
On the other hand, you could be selling a product that isn’t particularly valuable or attractive to thieves, but has a higher chance of causing injury or damage to your customers. Therefore not having product liability cover would be the bigger risk for your business. This risk is greater if your business also exports goods to the US and Canada as their highly litigious legal systems focus on consumer protection, meaning the courts may enforce punitive damages against your business, in favour of the consumer.
What our expert says
Jake Hales, Portfolio Underwriter
Historically there hasn’t been a specific insurance product that is tailored to the needs of an online retailer and these risks have been placed under a commercial combined or shop policy, neither of which are really suitable.
What other covers are typically bought alongside this one?
Depending on the size of the business, customers might also take out employers’ liability cover to protect against the legal and compensation costs should a claim arise from an employee.
What makes Superscript's online retail cover different?
The major difference in the cover we offer compared to others is that we don’t rely on the customer telling us about the products they sell. Instead, we ask the customer about their behaviour as a business (are they dropshippers or manufacturers, for example) and then form a list of products they cannot sell.
This is fantastic news for an online retailer as this gives them flexibility to sell any items that are not on our exclusion list. Other insurers will have an exclusion list as well as narrowing down the particular items they sell which can restrict for the seller and not allow their business to evolve naturally.
We also offer cover for stock being kept at third-party fulfilment centres, which some insurers do not, as the stock will not be kept in the business’ sole control.
Superscript’s online retailer insurance automatically covers stock whilst in transit within your own vehicles but we can also extend the cover for stock whilst out for delivery to your customers with a courier or postal service.
What is a common misconception about online retail insurance?
A common misconception is a seller thinking they cannot be brought into a claim as they are just the seller and not the manufacturer, unfortunately this is not always the case.
If you are buying your products from a manufacturer, distributor or wholesaler and that company ceases trading for whatever reason, then you could be liable for any damage or injury caused to a third party. This is not always the case but it’s worth considering the cover as you are part of the product’s chain of supply.
What is an example of a situation in which this cover would pay out to a customer?
If one of the products that you sell causes damage or injury to a third party then, subject to complying with the conditions set out in your policy, this would be covered under the product liability section.
Does this cover protect Amazon sellers?
Amazon requires all sellers on their marketplace to have insurance in place if they export to the US more than $10,000 (roughly £8,000) in any one month of trading. Plus, the insurance policy needs to state Amazon as an additional insured. We can do this with our product, meaning that we can ensure that Amazon sellers are protected.
Anything else we should tell customers about this product?
This product is designed specifically for online retailers of all sizes. Our product limits cater for someone making hand-crafted items at home to clothing manufacturers with up to £2m turnover. We offer cover for stock being kept at a third party logistic centre or at your home address.
This content has been created for general information purposes and should not be taken as formal advice. Please always refer to your policy documents for full details around exclusions, terms and limits of your customised cover. Read our guide to understanding your policy documents.
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