When Amazon announced it was expanding its requirements for sellers to maintain product liability insurance, responses ranged from skepticism to outright hostility.
“Do I see it well? Will I be forced to take out some kind of insurance, or will I be in trouble? A seller wrote in a comment on the Amazon Seller Central post.
“It totally sounds like what the mafia did, they just called it ‘protection money’,” the seller wrote. “They forced mom and the pop stores / businesses to pay this money, so their buildings didn’t ‘accidentally’ burn down.”
This could be an overstatement of the scope of Amazon’s policy change. By letter, effective September 1, Amazon required sellers to purchase product liability insurance once they hit $ 10,000 in sales in one month on Amazon.com. Previously, the requirement only applied to sellers who met this threshold for three consecutive months.
So the requirement is not entirely new, but Amazon has put in place a new program to help sellers find a qualified policy, and also reports that the enforcement of the insurance mandate will become more stringent.
Amazon did not immediately respond to a request for comment, but an official at Marsh, the insurance broker that facilitates the Amazon Insurance Accelerator, explained how the program works.
The Insurance Accelerator aims to “really simplify and I would almost say demystify the insurance process,” said Wendee Wood, CEO of Marsh’s Affinity Practice, in an interview.
Marsh had been working with Amazon for a few months to get the program up and running ahead of last month’s announcement, Wood said. At launch, Marsh had implemented product liability coverage through insurance providers Chubb, Harborway Insurance underwritten by Spinnaker Insurance Company, Hiscox, Liberty Mutual Insurance, Markel and Travelers, according to the company.
The terms of those policies vary in detail, but in general terms each will provide sellers with comparable coverage, Wood said.
These policies have all been designed to meet Amazon’s criteria for a qualified insurance plan, which includes requirements for minimum liability limits and a measure of the insurer’s financial stability.
“Part of our goal is to make sure the carriers available through the accelerator are financially sound,” said Wood. “Carriers must have a minimum financial rating. “
Amazon allows sellers to purchase insurance through a provider outside the accelerator, but Wood acknowledges that in practice it would be difficult for the typical seller to ensure that the policy meets all the criteria. from Amazon and guarantees a competitive price.
“It’s very important that if they don’t go through the accelerator, they do their due diligence,” she said.
Rates are a central part of the pitch for the accelerator. Each policy varies, but the vast majority of salespeople Wood has seen purchasing insurance under the program pay premiums of less than $ 1,000 per year, typically in the range of $ 500 to $ 750, she said. .
“Most of the salespeople that we see going through the experience end up in what we call the minimum premium stage,” she said. “It’s really affordable coverage for the protection they get.
Of course, some sellers are complaining that Amazon is imposing the insurance mandate, although many were unaware that the requirement was already in place for sellers above the threshold of $ 10,000 / three consecutive months, or had simply chosen not to buy insurance or had taken out a shoddy plan with limited coverage.
“What we’re finding is that a lot of sellers hadn’t purchased insurance before,” Wood said. “They may not have fully understood what their risk was as a small business owner.”
For its part, Amazon promises to pay for legitimate product liability claims up to $ 1,000 filed against sellers who have qualified insurance policies through its A-to-z warranty program. Amazon says 80% of the product liability claims it sees are under $ 1,000.
These situations can arise when Amazon deals with customer complaints and then notifies the seller if a product liability claim is filed. Amazon offers a thinly veiled threat to sellers who ignore a claim.
“If a seller does not respond to a complaint, Amazon will step in to respond directly to the customer’s immediate problem, bear the costs ourselves and sue the seller separately,” the company said.
Amazon’s insurance requirement applies globally to all sellers who reach the monthly threshold of $ 10,000 in sales in one month. When launching, the Insurance Accelerator is only available to sellers in the United States and China, although it is slated to expand to other countries.
Sellers who choose not to purchase insurance but hit the $ 10,000 mark in sales could find their days on the platform numbered. Wood asked Amazon about the app, but suggested the company is serious about monitoring its market to ensure higher-volume sellers are properly insured.
“Amazon will work with the seller to enforce the coverage requirement,” Wood said.