Protecting your assets with Amazon FBA insurance is one of the best things you can ever do for your business. Find out in today’s episode with Peter Heibloem.
Peter Heibloem is the CEO of Online Sellers Insurance.
Insurance and risk
“If you want to make serious money, you’ve got to get serious.”
You’ve got to get serious about protecting your asset along the way with Amazon FBA insurance.
Legally if you put your brand on products, and selling it in other countries, you are deemed to be the manufacturer!
What are you insuring against?
Personal injury or property damage are the two categories of risk we are looking at really.
These are the main risks.
It’s a requirement to “hold Amazon harmless” under Amazon’s Terms of Service.
In August 2019, there was a new “business agreement” which Amazon is enforcing on 3rd party sellers.
The Old rules no longer apply:
- $10K/mo for 3 consecutive months before need insurance
- Professional account holders only.
Now from day one, there is a Clause that we have to “hold Amazon harmless”.
Amazon has the right to come after us to get their money back.
Insurance is the best protection against this.
Someone had a product that modified the toilet in some way.
It leaked and damaged property.
The buyer filed a claim with their insurance company.
The insurance company filed a claim with Amazon.
Amazon then went after the 3rd-party seller!
High-risk Product categories
Yes, demand and competition are important. But you need to consider insurance and risk as a factor. If you have a shortlist of 2-3 products, bring in the insurance issues around that to help you make a final decision. Especially if you are not very knowledgeable in the niche.
These days insurers can be scared of risk in selling in America or Canada.
Premiums might be $5000-6000 AUD. However, now Peter has educated insurers, the insurers can now offer premiums of $2000 AUD for similar products.
Amazon’s due diligence reduces insurers’ anxiety
Insurers might initially see Amazon as similar to Gumtree.
But there are burdens of proof to even open an Amazon account, and more to get approved for a category in Amazon FBA insurance.
Filtering product selection by insurance risk
There are no tricks!
The more compliance required the harder to get started – eg getting the product tested to get a report. However, this is a great way to look at putting a moat around your business. If you find it hard, so will other potential sellers. Many of them will just move on. That’s potentially your opportunity.
There are some obvious risk differences too.
Butter knife vs. A pocket knife is obviously different.
Electrical goods clearly carry some more risks.
People tend to sue for things related to Baby. For that reason, there are a lot of safety standards that Amazon has before they let you sell some kinds of items.
All insurance policies say that the seller needs to meet the minimum requirements of the state.
A simple google search of product safety standards with your product can do that.
Make sure you have correct instruction manuals for Amazon FBA insurance:
- Packaging, safety manuals, etc.
- Eg plastic bag without a suffocation warning label and holes punched in -above a certain size (5 inches/12 cm)
- Eg 2. -3 M (9 feet) cable for electrical – 1.5 m safety cable (9 feet)
If Amazon approves something, you can be pretty confident you have ticked the boxes for insurers.
It’s worth knowing that defective products are usually NOT covered by insurance!
You need to get products tested before they go into a container
if someone puts a car cover over a Mercedes Benz and it melts onto the car and it damages the paintwork – if someone sues you, you WOULD be covered (for property damage).
However, if you said “Thanks for paying out but I’ve also got 999 others in the warehouse that are defective, can you pay for those too?”, the answer would – no! You’re not covered!
Defective products are NOT covered; the damage caused by any such products IS covered.
Is it possible to get insurance against defective products being made for you?
This is called Product recall insurance – it’s really hard to get and very expensive even if made in Australia.
Peter’s guesstimate is that it’s hard to get in China.
Is general liability insurance the same as product liability insurance?
There IS no practical difference.
In the USA they call PLI they call it GL and in Australia called PL and in the UK called PL.
Is it compulsory to have insurance in Europe, Australia, Japan?
Yes, it certainly is.
How much cover do you need to have?
$1 million USD worth of cover. In Australia, usual product or public liability starts at $5 million so that’s no issue.
2nd requirement: you need is to see whether a significant % of products are being sold in the USA and Canada. Simply because they sue each other so much!
For anyone in the UK, it’s hard to know what % it would represent. You need to be sure it’s declared on paperwork.
Amazon on your insurance form
3rd thing: Amazon requirement: requires itself to be noted on the insurance form as an “interested party”
Peter was working as a regular insurer. Came across Amazon opportunity. Wanted to get a side hustle going and always interested in starting an online business.
- Particularly good not to have the product in the garage.
- Had usual nightmares with China – but the stock still sold out, so success
Part of biggest seller community in Australia – Reliable Education [affiliate link] (knows Adam well)
- Bought his course
- Got 5 products – $30-40K USD/month – 18 months in
Australian based – Amazon sellers started approaching Peter for insurance, having read his background.
- Was insurance broker before Amazon
- Had staff and 300 clients
- Walked away from bricks and mortar business
Now do insurance for Amazon and eBay sellers
Who do you serve?
Primarily those selling on amazon.com – it’s hard to get insurance there! The underwriters offer insurance for everywhere outside the USA and Canada.
They have referral partners in USA, UK, Australia, New Zealand.
But they can help work with you even if you’re not based there.
Sellers based in the USA or elsewhere in the world.
Their worldwide cover is through Lloyds of London.
Not many insurance agents on Amazon.
Australians used to pay $10K for cover for premiums for a single product (worldwide)- now just $1500-2K per product line
A deal for Amazing FBA listeners: amazingfba.com/OSinsurance
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Watch my full interview with Peter Heibloem
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