What is the Amazon Insurance Accelerator?
If you have a store on Amazon and have sold more than $10,000 worth of products in any single month, you probably know by now that you are required to have Amazon seller insurance. But finding the right coverage for your store isn’t always so easy.
To help out, Amazon has stepped in with their Amazon Insurance Accelerator, a network designed to put Amazon sellers in touch with Insurance companies who can meet their liability insurance needs.
What is liability insurance?
The purpose of product liability insurance is to cover you in the event that your product harms or does damage to a customer or their property. If that happens, the customer can make a claim against you, the cost of which can run into hundreds of thousands or even millions of dollars.
Customers can make a claim if the damage can be shown to be due to
- A malfunction in your product, for example, faulty electrical wiring
- A manufacturing defect, such as parts coming loose
- Poor design that could lead to an accident
- Safety labelling being absent or insufficient
When calculating your premiums for liability insurance, insurers will take into account two main factors:
- How risky your product is – Some products are, of course, more dangerous than others. Those with an electrical component are more likely to cause an accident, for example. Likewise those with sharp edges, or products made from easily breakable materials like glass.
- How many units you sell – the more units of a product you sell, the more likely that the product will cause an accident for someone, somewhere. Even a one-in-a-million accident will happen if you sell a million units!
Having assessed risk, exposure, and other pertinent factors, your insurance company will give you a quote. It’s important to note that the quote is based on projected sales, so it’s a good idea to get your quote ahead of busy seasons or major sales days to ensure that your quote is as accurate as possible.
Why does Amazon require liability insurance?
If your product was sold to the customer on Amazon, chances are the customer will approach Amazon for compensation. Amazon will pay claims of up to $1,000 themselves on your behalf, but only provided you have valid liability insurance in place.
Given this, it makes sense that Amazon wants to limit their losses due to insurance claims. Consequently, they now require Amazon sellers who have sold more than $10,000 worth of products in any one month to get a good insurance policy in place. In the event that a claim is made for over $1,000, Amazon will pass the claim on to your insurance company.
While Amazon requires insurance to limit their own losses, they also have an interest in seeing stores succeed on its platform. Smaller eCommerce businesses can easily be wiped out by just one large claim, causing the owner to lose the business entirely. From Amazon’s point of view, that’s revenue lost. From your point of view, it’s far more serious. Therefore it’s in your own best interest, as well as Amazon’s, to get adequate liability insurance in place, no matter what level of monthly revenue you are currently achieving.
How does the Amazon Insurance Accelerator work?
As an eCommerce business owner, it sometimes feels like you have to be an expert on every single aspect of the business. From marketing to HR, to production and finance, the buck stops with you.
Amazon understands that running an eCommerce business is therefore a juggling act, requiring you to work hard to keep all aspects of the business up and running at once.
That’s where their Amazon Insurance Accelerator Program comes into play. In 2021, Amazon teamed up with a number of companies to offer US-based sellers the ability to buy insurance directly within Amazon Seller Central. There, you can compare quotes, find one that’s right for you, and purchase insurance.
The idea is to cut out uncertainty and effort, by having Amazon vet the insurance brokers for you.
Do I have to be an Amazon Insurance Accelerator participant to be insured?
Sellers are not required to be an Amazon Insurance Accelerator participant to meet their obligation to hold Amazon seller insurance. Some sellers may find that the insurance offered through the Amazon Insurance Accelerator program isn’t the right fit for them and their products.
The insurance industry as a whole has been slow to adapt to the rise of eCommerce. While on the surface, eCommerce businesses seem to merely be brick-and-mortar shops on a screen, in reality, eCommerce has radically changed the way we sell and buy all sorts of products and services.
Some eCommerce sellers have taken advantage of this new commercial landscape by going radically niche, selling highly specialist products that insurers simply may not understand. Others have taken advantage of the fact that they aren’t limited by physical space to vastly expand their product ranges, again, baffling traditional insurance brokers.
In both of these scenarios, insurance brokers will quote high to avoid being caught out by an unexpected or unseen risk factor. For that reason, it’s crucial that eCommerce sellers shop around for an insurance broker that understands their specific business model and insurance needs, making sure that they are paying premiums which realistically reflect their risk and exposure profile.
Get your Amazon seller insurance today and protect your store from unexpected losses.