E-commerce Insurance: Here are Reasons Why Your Business Should Definitely Have One
The need for e-commerce insurance has been certainly on the rise as a corollary to the e-commerce business growth in popularity. This type of insurance is designed to protect businesses that sell goods and services online from potential risks and losses. According to Allied Market Research, the global online insurance market is expected to reach $330.1 billion by 2031, rising at a CAGR of 20.2% from 2022 to 2031.
In this blog post, we'd like to discuss what e-commerce insurance is, the available types, and the reasons why e-commerce businesses should have it. We'll also provide some tips on how e-commerce businesses can choose the most suitable insurance for their business. Let's get started!
1. What exactly is an E-commerce Insurance for Business?
E-commerce insurance is designed to protect businesses that sell goods and services online from possible risks and losses that may occur during the purchasing process. E-commerce businesses face unique risks and challenges compared to traditional brick-and-mortar businesses. Some of the potential risks and losses that e-commerce businesses may face include cyber attacks, data breaches, product liability claims, shipping and delivery issues, etc.
As a result, e-commerce insurance is designed to provide coverage for these risks and losses. It typically covers a wide range of risks and losses, including loss or damage to products during transit, theft, damage or loss of data due to cyber attacks, and product liability claims.
2. What are the Types of E-commerce Insurance?
There are several types of e-commerce insurance available, and businesses can choose the type of insurance that best suits their needs. Here are some of the most common types of e-commerce insurance:
Cyber Liability Insurance
This type of insurance provides coverage for losses or damages resulting from cyber attacks, such as data breaches, malware attacks, and hacking incidents.
Product Liability Insurance
This type of insurance provides coverage for losses or damages resulting from defective products, including product recalls and legal fees associated with product liability claims.
Shipping and Delivery Insurance
This type of insurance provides coverage for losses or damages that occur during shipping and delivery, including lost or damaged packages, and delayed or lost shipments.
Business Interruption Insurance
This type of insurance provides coverage for losses or damages resulting from interruptions to business operations, such as power outages, natural disasters, or other events that prevent the business from operating normally.
3. Why Should E-commerce Businesses Have E-commerce Insurance?
There are several reasons why e-commerce businesses should have e-commerce insurance. Here are some of the most important reasons:
Protection Against Cyber Attacks and Data Breaches
E-commerce businesses are at a high risk of cyber-attacks and data breaches, which can result in significant financial losses and reputational damage. E-commerce insurance can provide coverage for these losses and help businesses recover quickly from cyber attacks.
The same thing happened to Equifax! In 2017 Equifax encountered a data breach, which exposed the personal data of 147 million people. Equifax was sued by consumers and investors for negligence and faced significant legal and reputational damage. The company's cyber liability insurance helped cover the costs of legal fees and other expenses associated with the breach.
Protection Against Product Liability Claims
E-commerce businesses are also at risk of product liability claims, which can be expensive and time-consuming to defend. Product liability insurance can provide coverage for these claims and help businesses avoid financial ruin.
Still not convincing enough? Here’s an example that may make you re-examine
In 2016, Samsung Galaxy Note 7 recall was issued after reports of the phone catching fire, which was caused by a battery defect. Samsung faced significant legal and financial damages as a result of the recall, and its product liability insurance helped cover some of the costs. Imagine without those fee covering, how costly did that big corp have to compensate.
Protection Against Shipping and Delivery Issues
E-commerce businesses are also at risk of shipping and delivery issues, which can result in lost or damaged packages, delayed or lost shipments, and other problems. Shipping and delivery insurance can provide coverage for these losses and help businesses avoid financial losses. According to a report by Pitney Bowes, 22% of online shoppers have experienced lost or damaged packages in the past year.
An example that highlights the importance of shipping and delivery insurance is dating back to 2013. In the 2013 holiday season, UPS and FedEx were overwhelmed by online orders and were unable to deliver packages on time. Many businesses were impacted by the delayed deliveries and faced financial losses as a result. At that time, shipping and delivery insurance can help cover the costs of lost or delayed shipments.
Peace of Mind
Lastly, having e-commerce insurance provides peace of mind to business owners. With insurance coverage in place, business owners can focus on growing their business without worrying about potential risks and losses. This can help improve the overall health and well-being of the business, and allow business owners to focus on providing the best possible experience for their customers.
4. How Can E-commerce Businesses Choose The Suitable Insurance?
Choosing the suitable e-commerce insurance for a business can be a daunting task.
Here are some tips to help e-commerce businesses choose the suitable insurance:
Identify Potential Risks
E-commerce businesses should identify the potential risks they face, such as cyber attacks, product liability claims, and shipping and delivery issues. This can help them determine which types of insurance they need.
For example, one potential risk for e-commerce businesses is chargebacks, which occur when a customer disputes a transaction and requests a refund from their credit card issuer. Chargebacks can result in lost revenue and additional fees for e-commerce businesses. By identifying this potential risk, businesses can consider purchasing chargeback insurance to protect themselves.
Assess Insurance Needs
E-commerce businesses should assess their insurance needs based on their potential risks and losses. For example, a business that sells physical products may need shipping and delivery insurance, while a business that handles sensitive customer data may need cyber liability insurance.
In fact, in 2019, a data breach at Capital One exposed the personal information of over 100 million customers. As a result, Capital One faced significant legal and reputational damage. By assessing their potential risks, e-commerce businesses that handle sensitive customer data can consider purchasing cyber liability insurance to protect themselves in the event of a data breach.
Research Insurance Providers
E-commerce businesses should research insurance providers and compare their coverage options and pricing. It is important to choose a reputable insurance provider that has experience working with e-commerce businesses.
For example, an e-commerce business that sells high-value items may want to choose an insurance provider that specializes in insuring luxury goods. This can ensure that the business has the appropriate coverage and that the insurance provider has experience handling claims related to their products.
Review Policy Details
E-commerce businesses should review the details of their insurance policies carefully, including coverage limits, deductibles, and exclusions. It is important to fully understand what is covered and what is not covered under the policy.
For example, a business that sells products internationally may need to ensure that their shipping and delivery insurance covers international shipments. Similarly, businesses that sell products with unique risks, such as food or medical devices, should review their product liability insurance policy to ensure that it covers these specific risks.
Seek Professional Advice
E-commerce businesses may want to seek professional advice from an insurance broker or agent to help them choose the most suitable insurance for their business. For example, they can help businesses understand the potential risks they face and identify the types of insurance they need. They can also help businesses compare coverage options and pricing from different insurance providers, ensuring that they choose the most suitable coverage for their needs.
In conclusion, e-commerce insurance is an essential investment for e-commerce businesses. It provides protection against potential risks and losses, such as cyber attacks, product liability claims, and shipping and delivery issues. By identifying potential risks, assessing insurance needs, researching insurance providers, reviewing policy details, and seeking professional advice, e-commerce businesses can choose the most suitable insurance for their business and enjoy peace of mind knowing they are protected.
If you are looking for a trusted IT partner, VNEXT Global is the ideal choice. With 14+ years of experience, we surely can help you to optimize your business digitalization within a small budget and short time. Currently, we have 400+ IT consultants and developers in Mobile App, Web App, System Development, Blockchain Development and Testing Services. We have provided solutions to 600+ projects in several industries for clients worldwide. We are willing to become a companion on your way to success. Please tell us when is convenient for you to have an online meeting to discuss this further. Have a nice day!