During the COVID-19 pandemic, online retailers experienced a substantial increase in sales as more customers shifted from traditional brick-and-mortar stores to online shopping. In addition the number of ‘Amazon-style’ online traders, particularly sole traders and micro-businesses exploded in parallel.
This trend appears to be here to stay. With online sales accounting for 23% of retail sales in the UK, consumers have embraced the convenience and speed of online shopping. And with Amazon maintaining its position as the UK’s leading online marketplace, this is undoubtedly good news for those businesses who trade via the platform.
However, there’s a balance to be struck. If something goes wrong and your business suffers, you could see your funds deplete faster than you can say “click here.” Additionally, UK-based sellers should be aware that Amazon’s insurance requirements vary depending on how you sell and whether you do so on their UK or US website.
So it’s now more important than ever to get specialist insurance to protect your business.
Planning for the unexpected
If the pandemic has taught us anything, it’s to expect the unexpected.
Like a kitchen gadget that catches fire in someone’s home after its batteries overheat. Or a customer who might take legal action against you after a heavy ornament slips out of its packaging and injures their foot. Thankfully, such accidents are rare. But it only takes one to significantly impact your business.
Rightly or wrongly, you’ll have to defend yourself – and pay out of your own pocket to do so. Plus, you’ll need to cover court costs, legal representation, and possibly compensation. This could amount to several thousand pounds.
Unless you have an online retailers’ policy that covers these expenses.
Why do online sellers need insurance?
As a third-party seller, you can’t assume the platform you sell on will cover your legal costs if you get sued. Or that the injured party will go after the larger company for compensation instead of you. And if you occasionally ship to countries with a litigious culture, like the US, it’s wise to be cautious.
That’s where online retailers’ products liability insurance comes in. It covers you if someone claims damages because something you sold injured them, damaged their property, or made them sick. You’ll still have a case to argue – but you don’t have to do it alone. Products liability insurance covers the cost of a lawyer to represent you in court. If you have to pay damages to the injured party, it covers that too.
Do Amazon sellers need insurance? According to Amazon’s sellers’ agreement, “you will defend, indemnify, and hold harmless Amazon, our officers, directors, employees, and agents, against any third-party claim, loss, damage, settlement, cost, expense or other liability.”
It’s quite a mouthful. It means that if you’re an SME selling and dispatching products using Amazon’s website or services, and something goes wrong, Amazon won’t take responsibility. The sale is between you and your customer, so the responsibility lies with you.
Amazon are aware of the risks, and that’s why they protect their mammoth business by having such stringent terms and conditions. And why, if your turnover exceeds a certain amount, Amazon requires specific insurance coverage.
Insurance requirements for Amazon UK sellers
If you’re a UK-based online retailer selling on Amazon.co.uk or its European platforms (including Amazon France, Germany, and Spain), online retailers’ insurance can help protect your business. The amount of insurance coverage you need depends on your sales turnover and Amazon’s requirements.
According to Amazon.co.uk, Fulfilment-by-Amazon (FBA) sellers who earn over £4,000 per month for three consecutive months need:
- Products and public liability insurance (with a minimum of £400,000 cover for each claim)
- Amazon named as an ‘additional insured’ on their policy
- Proof of insurance if requested by Amazon.
The insurance must be valid, covering the dates you’ve been trading and purchased from a reliable insurer.
It may seem like a lot, but having online retailers’ insurance is worth it when selling on Amazon UK, whether you’re an FBA seller or not. It protects both you and Amazon. And it means you won’t have to dip into your savings if a customer claims your products caused them loss, damage, or injury. If things escalate, your insurer will step in to settle the claim.
Public Liability or not Public Liability?
Because of how they operate, most Amazon sellers have little to no contact with the public or anyone else connected to their business. So there’s no need for public liability insurance?
Wrong. You might pack and ship your products from home, but you’ll still have couriers arriving at your door (often in a rush). And while you might not meet face-to-face with suppliers or customers now, there’s a chance you might in the future.
Public liability insurance covers you if a member of the public gets injured while interacting with your business.
So, if the postie trips over a loose paving slab in your driveway and breaks a hip, or your pop-up stall topples over and injures someone, you won’t be left with the bill. Public liability insurance also covers occasional selling at events and markets.
Sticking up for stock
Lastly, consider one of your most important assets: your stock. Without it, you can’t sell, and without sales, you don’t have a business. If you store, sell, pack, and ship most of your products from home, you might assume your home insurance policy would cover any losses if your stock gets lost, damaged, or stolen.
However, home insurance is designed to cover your home contents, not your business losses. Stock and property insurance, on the other hand, covers any stock or equipment related to your business. It pays to repair or replace items if they are lost, damaged, or stolen. It also covers essential business equipment like your PC, printer, and desk.
If you would like to find out more and want to speak to a specialist in the Howden Commercial Team then please contact Adam Baxter, Commercial Account Executive from our Birmingham branch, on 0121 794 4195.
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This is a marketing blog by Howden.