There are many potential losses to online businesses, from damage to stock to having your data hacked. We look into what cover eCommerce businesses may need.
You run an online store and organising insurance feels like something you can put off, until – like one in five Australian businesses – you become the victim of a cybersecurity incident. Or your stock is damaged in your garage and you find out it’s not covered by your home insurance.
Did you know that products in transit aren’t generally covered by the transport company? And if you import stock to sell you can be considered the manufacturer, irrespective of whether you had anything to do with the manufacturing, and can be liable for any issues caused by the product.
Being sued feels unlikely, but Australia is following in the footsteps of the very litigious USA. In fact, according to The Australian Immigration Book: 2014, NSW is the most litigious state in the world after California and Texas.
We speak to insurance broker, Dale Mackney, of Bluewell Insurance Brokers, about the many insurance products online businesses could require. We also look at which are the most important and how you can protect yourself in addition to insurance.
What are the types of cover online retailers should consider and what do they protect against?
Depending on your workplace situation and the size of your operation, the average online retailers should really talk with an Insurance Broker and they would typically recommend covers like:
- Public and Product Liability Insurance, for third party property damage and injury.
- Property Insurance, which covers your stock and contents from things like storm damage, fire and, in some cases, flood. Even if you store products in your home, you will probably need a separate insurance for your business.
- Theft Insurance, which again requires a separate cover to your home and contents insurance.
- Transit Insurance – if you are importing from overseas or even just interstate could you afford to lose a shipment? Carriers don’t cover your goods for damage or loss.
- Management Liability is becoming a big thing in insuring online businesses that have staff. Cost for the defence of unfair dismissal and OH&S breaches are high – starting in the tens of thousands. Also, it covers staff fraud for things like them paying fake invoices into their own accounts. It takes an average of three years to discover this is happening, costing some businesses hundreds of thousands before it’s discovered.
- Income Protection Insurance – if you’re injured will you be able to pay yourself and/or a replacement person?
- Cyber Liability is growing as a must have insurance for online businesses, to cover against hacking, loss of client’s data, passwords and other personal information and the inevitable legal issues after such breaches, ransom payments for viruses such as Cryptolocker and other forms of cyber scams.
There are many more covers available such as: Commercial Motor; Professional Indemnity; Workers Compensation, which is compulsory in all states if you have staff; Money; Business Interruption; Tax Audit; Glass; Deterioration of Stock; Employee Fraud, which can come under the umbrella of Management Liability, as mentioned above; and Machinery and Equipment breakdown. Any business that is serious about being protected should talk with a qualified Insurance Brokerage that deals with online businesses to discuss their specific needs and requirements.
What insurance products are most essential for online retailers?
We hands down find the most common cover for all online businesses is Public and Product Liability Insurance. If your product causes injury or property damage out in the market place, you will be held legally liable for the costs incurred and even if you have done everything right you still may end up in court or with legal costs. Even if your product seems ‘safe’ this also covers you for someone hurting themselves on your premises. Public and Product Liability cover can generally be obtained easily and cheaply. Try jumping online to get a Public Liability Insurance Quote.
Do you think people are suing more nowadays? Have you seen online retailers get into serious financial trouble?
The increased public knowledge regarding the ease of suing due to companies advertising ‘No win, No Fee’ legal services has definitely increased the amount of people suing over past couple of decades. We see online retailers increasingly relying on their insurance to get them out of what would have otherwise been very expensive situations. There is the mentality that if you have a major event like a fire, you’ll just claim on your contents insurance and you’ll be right back to business, but in most cases it takes months or even years to get your business back to 100 per cent and the bills don’t stop coming in because you’ve stopped trading.
If business owners only go for one or two types of insurance, what are some things they can do to protect themselves against different forms of liability?
To protect yourself it’s important to register and trademark your business name and logo, so that someone doesn’t start trading under your name. It’s also important to have comprehensive Terms and Conditions on your website, which can go a long way to protecting your assets and your business. Have a lawyer and your insurance broker check them over for you.
Education of the customer and quality of the product can also be major issues. Let the customer know how to use your product correctly and warn them of potential dangers. If you sell skin creams, for example, tell the customer to do a test on their skin first to check for an allergic reaction.
Make sure that the quality of goods is there and they meet Australian standards. It’s too late once you’ve received an import from China of cheap electrical appliances, for example, and your customer plugs it in and starts a fire.