How Hong Kong eSellers Can Meet Amazon’s Insurance Demands
Amazon is one of the most effective ways for merchants to reach a large, motivated audience by giving them the perfect platform to showcase their products. However, while it’s easy to sign up to the online marketplace, one section that’s often overlooked in the Amazon Services Business Solutions Agreement is insurance.
Amazon requires that all merchants on the Professional Selling Plan need to buy and maintain commercial general liability insurance of up to US$1 million per occurrence, with the aggregate covering liabilities caused by, or in connection with, business activities.
Why You Need Commercial General Liability Insurance
Selling products through Amazon doesn’t necessarily mean that merchants will escape their product liabilities. Until recently, Amazon was not considered a seller or a distributor of a product, but rather an online platform hosting a certain number of distributors. Therefore, they were not liable for any defect in the product sold. In case the product sold through Amazon causes damage to a third party, the latter is entitled to seek compensation from the seller.
While the chances of a customer suing you may be relatively low, Amazon doesn’t want the responsibility of having to deal with the financial obligations that arise as a result of accidents, injuries or litigations caused by one of your products. For example, if a customer was hurt using an item they bought from you, commercial general liability insurance includes a product liability cover whereby material damages or bodily injuries suffered by a third party because of the product will be indemnified, protecting you and your company’s assets.
In most instances, manufacturers are not usually in the country where the product is distributed — instead, distributors are in the front line of any claim for any injuries that are caused by an unexpected product default.
Also, when applying for commercial general liability insurance, you would need to list Amazon.com, Inc as the co-insured party in the event the customer tries to sue them directly because of an item they bought from your store.
A Breakdown of Amazon’s Requirements
If you have an individual seller account, Amazon does not require you to have insurance. Additionally, if you’re an Amazon pro seller and don’t hit the insurance threshold below, then you are also not required to purchase this type of insurance — however, in both instances, it’s still recommended that you take out some form of coverage.
The insurance threshold is set at:
- US$10,000 if the ‘Elected Country’ is the United States
- CA$10,000 if the ‘Elected Country’ is Canada
- ¥1 Million if the ‘Elected Country’ is Japan
- MX$100,000 if the ‘Elected Country’ is Mexico
If you don’t fulfil the requirements set out by Amazon and refuse to take out commercial general liability insurance, they will suspend your account which could subsequently lead to the end of your online business… A big price to pay as opposed to a relatively affordable monthly premium.
How to Protect Your Products
Even if you are just starting out, taking the time to find a good insurance policy for your online store will help protect you in the unlikely event one of your products causes an accident.
Insurers will require certain information about your business and your product in order to generate a personalised quote, so be prepared to answer questions truthfully about the products you sell on Amazon to ensure you will get the best insurance appropriate to your risk profile. The insurance premium depends on the type of product sold, the volume of business you have and the area of sales.
In order to set up your product liability insurance, contact Clema Risk Solutions who offer tailor-made insurance solutions through a simple online process for SMEs based in Asia.
Clema Risk Solutions was founded in 2007 and now has offices in Hong Kong, Singapore and Shanghai with approximately 30 associates.