E-commerce businesses invest vast amounts of time and effort to engage with customers, increase sales, and offer promotions, but it can be challenging to control the entire customer experience.  Various factors such as delays in shipping, damaged items, or missed delivery slots can often cause stress for both consumers and brands hoping to keep customers satisfied.

The ongoing impact of the COVID-19 pandemic has created drastic changes for brands during this year’s holiday season and is expected to continue causing uncertainty with supply chains in the near future. Demands for shipping support have increased, causing many major carriers to cease flat rate fees and introduce holiday shipping surcharges. In turn, this has also affected shipping deadlines meaning that most businesses must allocate additional time to process stock shipments. In the UK, over 13.3 million sq. ft of warehouse space being rent over the last three months, more than double the amount rent over the same period a year earlier.

About shipping insurance

To mitigate the risk of the ongoing situation, shipping insurance can provide merchants with an additional layer of protection to their supply chain and ensure customer satisfaction even when their delivery process doesn’t go as planned.

Carriers are not always able to fulfil orders accordingly, which can lead to significant costs arising for the shopper or merchants. A shipping insurance service can remedy the situation by protecting consumers and manufacturers when a package does not arrive at its destination due to loss, theft, or damage. Insured parcels will enable the insurance holder to be reimbursed the declared value of the items in the package. Commonly, this will be applied through a refund or a no-charge reorder for buyers, whereas sellers will receive money-back reimbursement for the goods sold. Depending on the selected carrier, some packages will be automatically covered up to a certain amount of value without occurring additional costs.

Merchants should also be aware that some items cannot be insured. This commonly includes currency, hazardous materials, gemstones, and high-value items. Other items may also have a lower coverage limit, offering compensation for only up to a certain percentage of the item’s total value. Third-party shipping companies will often have a maximum declared value, so it is always recommended to check whether your products are exempt due to value or item specifics. Establishing a comprehensive insurance strategy is imperative for merchants seeking to improve long-term customer retention.

Buyer vs seller – the different types of seller insurance

The two categories applicable to merchants seeking shipping insurance include buyer and seller. Merchants that opt for buyer insurance allow consumers to select the option for insurance to be applied at checkout, typically amounting to around 1.5% of the overall transaction value. This can be enabled on both an opt-in and opt-out default basis for the customer.

The other option, seller insurance, offers a sender-funded solution meaning that all aspects of the insurance are covered before the item is sent to the buyer. This has become increasingly commonplace, as customers may often associate a negative shopping experience with the seller rather than the carrier. Even in instances where the package was damaged in transit or after delivery, it can be frustrating for customers to deal with an additional company instead of engaging with the brand. Sellers that are seeking to offer consumers a comprehensive shipping insurance solution should refer to an authorised insurance provider.

Why is shipping insurance important?

Although it can be a cost-effective solution to offset the insurance costs onto the consumer, especially during the COVID-19 pandemic, in most cases, it is favourable for the seller to absorb the costs. While it may occur additional charges, there are numerous positive impacts for the seller, including:

Alleviating the risk of occurring charges due to theft, loss, or damage

An uninsured item that is lost, stolen, or damaged during transit will typically incur charges for the seller. In such instances, merchants will have to fully cover the mailing and product costs, as well as ship another product to the customer. With insurance, sellers are instead reimbursed for the value of the package in such instances.

Increasing revenue

A positive experience with a customer will always encourage repeat transactions and increase brand loyalty. By considering every customer touchpoint, including fulfilment, sellers will be more likely to provide a better experience for the customer. The relatively low cost of insurance will enhance the customer purchasing process, and likely increase revenue in the future by improving the customer’s lifetime value.

Protecting brand image

Negative post-purchase experiences with package deliveries will likely lead to irritated customers, poor word of mouth, and less incentive for that customer to return. By investing in the customer experience, merchants can protect their brand from any negative interactions caused by external factors like fulfilment.

Mitigating risk with the right insurance

Merchants without shipping insurance are exposing their fulfilment processes to considerable risk. However, considering which factors are most important to a seller will determine the risk or whether they should mitigate their risk. This includes:

The types of items

The risk of a package being damaged or stolen during transit will vary depending on the type of product. Some categories such as designer brands are items that are more likely to be in danger of going missing.

Destination

The destination of a package is also likely to pose a certain risk for sellers. Some areas may have locations which are difficult to spot or access, or even have reduced fulfilment services in the region. If the delivery is international, then customs may also be another risk factor for certain items. Adding tracking or signature requirements can help minimise the risk of an item not being received, as well as allocating alternative carriers or a longer shipping time to ensure orders can be fulfilled on time for customers in areas with less coverage.

Back-up for the unexpected

With anticipated busy months coming ahead, brands must establish their insurance strategy to prepare for the influx of customers using digital platforms. Creating a positive experience across the entire customer journey can help with improving your customer loyalty and outperforming competitors.

Providing easy-to-use, generous policies for loss, damage, or theft is one of the best methods for sellers to improve the post-purchase experience. Although this can be a costly investment depending on your products, it is often worthwhile to provide protection for your items until they reach the customer.