Online business is the realization of business activities over the Internet. One of the major components of online business is e-commerce which refers to the buying and selling of goods/services online.
Thanks to the increasing connectivity of today’s society and the concurrent development of intuitive e-commerce platforms, taking your business online is easier than ever - and many businesses are reaping the benefits. Firstly, e-commerce allows for businesses to have an online store that’s open 24/7 - with customers from far and wide that are not impeded by distance, bad weather, heavy traffic, or lack of parking space. And when you combine e-commerce with the right digital marketing strategy, it is a shoe-in for success.
But this online opportunity for businesses also carries its own set of risks, present at every stage of the customer’s journey. Whether a business is online or not, the adequacy of risk management can be the determining factor for the survival of the business.
So if you’re taking your business online, insurance for online businesses is something you definitely need to consider - and this will be the focus of this article.
So let’s get started!
Why Do Online Businesses Need Insurance?
In Canada alone, e-commerce retail sales amounted to around 1.85 billion dollars in late 2019 - with approximately 28.1 million Canadians having made online purchases. That’s around 75% of the total Canadian population!
E-commerce is so rewarding that it can be challenging to find a business that doesn’t do it in some way. Some of these businesses rely 100% on e-commerce while others have a physical location along with their online store (a.k.a brick-and-click stores.)
So now, let’s address the burning question: do you need insurance to sell online?
It’s highly likely that you do - because even in the most efficient or seemingly secure e-commerce systems, there are potential legal and financial risks.
Some of these risks are not very different from the risks faced by physical stores. This includes:
- Harm or injury to customers because of the product/s, resulting in costly settlements
- Property, equipment, and inventory can get damaged, lost, or stolen
- Advertising injuries like libel, slander, and copyright, which also entails legal costs
But on top of all that’s listed above, online businesses are prone to face the following additional risks:
- Lost, stolen, or damaged physical products during transportation
- Cyber attacks like data breaches and credit card phishing
So up next, we will go into specific risks for each stage of the customer journey and the coverages you need in your policy to address these.
Selling Products and Services Online
There are numerous e-commerce platforms available online that can help businesses get started with selling straight away. Here are some of the most well-known examples:
- Shopify - an intuitive and widely-used platform for setting up all kinds of online stores
- WooCommerce - a platform built on Wordpress for setting up all kinds of online stores
- Amazon - a online marketplace for selling just about anything
- Wayfair - an online marketplace for selling furniture and homeware
- Etsy - a global online marketplace focused on selling handmade or vintage items
If your business engages in e-commerce using the above platforms or something similar, then you need E-commerce Insurance to protect you. E-Commerce Insurance is a customized policy which includes various coverages that are relevant to your online business.
Commercial General Liability Insurance
An adequate e-commerce insurance will always include the commercial general liability insurance because this is essential. Commercial general liability insurance protects you from a wide range of risks and liabilities such as:
- Accidental injuries to anyone visiting your place of business
- Property damage caused by your employee while visiting one of your customers
- Reputational injuries to your business caused by libel, slander or copyright
E-Commerce insurance can extend further into various aspects of the customer journey. Depending on how you customize your E-Commerce Insurance, it can include Cyber Insurance, Cargo Insurance, and Product Liability Insurance - as we’ll be talking about in the next sections.
Storing Your Customer’s Information
During the course of your e-commerce transactions, it would be necessary to store some of your customer’s information. The collection and storage of this sensitive data is prone to cyber crime. This is where Cyber Insurance comes in.
Cyber Insurance provides protection for various types of cyber crime. A comprehensive cyber insurance typically covers the following:
- Investigative work done to determine the reasons behind the cyber attack and to gather evidence for the authorities
- Business losses experienced during the downtime and operational interruptions
- Lawsuits and resulting settlements
- Costs associated with notifying or announcing to the customers (as required by law)
Transporting Your Products or Goods
If you sell your physical products online, then you would need to have them delivered to your customer. For the risks associated with this step, you would need Cargo Insurance
Cargo insurance provides protection for any business that uses the services of a courier or transport company. This coverage serves to protect you from losses in the event that goods are lost, stolen, or damages while in transit. This can have different coverage levels such as land cargo insurance, marine cargo insurance, specific cargo insurance, and so on.
Customers Using Your Products
Even after products have reached the customer, it is not the end of potential liabilities. Products can cause injuries of all kinds like burns, allergies, and more. Sellers of toys are at particular risk because the users (babies, young children) may not be able to avoid risky actions or even have a concept of risk or danger - resulting in choking, poisoning from the toy’s components, and the like.
Any kind of injury caused to customers by the product can result in serious legal ramifications and even massive product recalls. Depending on the gravity of the claim, operations can cease and one lawsuit can result in a domino effect, inspiring other customers with negative experiences to go after your business.
This is where the Product Liability Insurance can help in minimizing risk.
Product Liability Insurance
This insurance policy protects manufacturers, distributors, wholesalers, and importers in the event that their product causes injury or damage to property. This coverage applies to scenarios such as production flaws, design defects, and marketing flaws.
Where You Can Get Insurance for Your Online Business
If you need a customized e-commerce insurance policy for your online business, then KASE Insurance is your best bet. As one of the top providers of business insurance in Canada, we’ve worked with numerous businesses from various industries. Our years of experience gives us the savvy to be able to understand the unique needs of your business and put together the best insurance policy possible. This is how we’ve garnered awards and recognition through the years. With KASE Insurance, you know you’re in good hands!