Posted on August 9, 2018 by Matt Morelli
For many organizations, the question whether to "self-insure" or enroll in a 3rd party shipping insurance plan is one that receives a great deal of scrutiny. From the outset, cost is cited as the rationale for self-insuring packages. On the surface this logic seems rigid, but when you begin to dig into the unidentified risk factors that need to be weighed, the line of reasoning begins to crumble. Here are some factors that need to be observed when choosing whether to self-insure or not.
Unforeseen Claims Processing Costs
Handling claims is a time consuming process. On the surface it may seem simple enough, to refund a client or ship a new package out if the purchaser claims that their package was received in poor condition, or not received at all. However, without a dedicated professional in-house claims team, and the proprietary software it takes to identify repeat offenders, and flush out fraud — the cost of handling claims can get out of control fast.
The reality is, not all insurance claims are factually correct. Some are outright fraud. Paying out fraudulent claims can be a very expensive problem, and withholding payment to legitimate claims is the fastest way to lose a repeat customer.
Cost of Replacement Goods
For manufacturers who sell B2C with high profit margins, the cost of replacing goods is likely low. For distributors or retailers however, the cost of replacing goods can be quite high since you are working with much smaller margins. U-PIC shipping insurance covers you at your full retail price, plus shipping. Not the just hard cost of replacing the lost or damaged unit(s).
Focus on More Profit Making Activities
The time your customer service staff spends on working a claim is time taking away from working with customers whose business you have not yet earned, where you would normally rely on them to talk the prospect through the process of purchasing, or perform other activities that optimize the ease and speed with which a customer can purchase from you.
Protection from Fraudulent Claims
Professional fraudsters steal billions of dollars per year. These thefts come in the form of package fraud, chargeback fraud, identity theft, etc. U-PIC employs and trains experienced claims processors who are up-to-date on the latest ecommerce fraud trends. We also use a proprietary system to identify potentially fraudulent claims, to protect our clients. Our claims process is fast and easy, but it is also thorough and ensures that only fully documented, valid claims are paid out. We work with our clients to identify fraudulent claims, and help them establish a black list for customers based on numerous data points, to protect them from future fraud.
In fact, at the time of this writing, U-PIC is in the midst of working with law enforcement to prosecute an individual caught committing insurance fraud to the tune of tens of thousands of dollars. Several companies have already shelled out huge amounts of money based on fraudulent claims of damage or loss. This is a common occurrence. Because the company who the fraud was committed against is a U-PIC customer, they are shielded from all of the work that goes into making sure individuals like this lose their ability to commit fraud. This includes the time (money) it takes to research and investigate these claims, work with law enforcement, be present when subpoenaed to court, etc. We do this all, so that you do not have to.
3rd Party Shipping Insurance Costs
U-PIC offers true shipping insurance, at prices up to 85% lower than carrier indemnity rates. Our insurance covers your selling price, plus shipping cost — not just the cost you incurred to purchase the goods for resale. Another thing to give much consideration to is the cost in time savings accrued when working with U-PIC, as mentioned above.
Insurance Companies Assume The Risk
Shipping history is no predictor of what the future holds. Insurance covers unforeseen dangers, and the insured shipper can ship with confidence knowing that no matter what, they are covered up to the shipping package limit. Because a company has had a relatively low loss rate in the past has no bearing on whether or not their future will see challenges.
At the end of the day, insurance is here for that huge problem that some of us may run into. Whether it be car insurance, health insurance, or shipping insurance — you don’t need it until you need it, and if you don’t have it when you need it, you’re going to be in hot… no, boiling water. You may balk at knowing that you are paying for something that you don’t feel like you need day to day, but when you need us, we’ll be here for you. We’ll assume 100% of the risk, so that when it happens, you are covered. That’s what we are here for.
If you’re not sure what’s right for you, and want to learn a little more about your options, don’t hesitate to reach out. Our agents will pull from nearly 30 years’ worth of customer data, to give you an idea of the cost you will see to be covered by shipping insurance, as well as some real world scenarios where being insured has paid off greatly for our clients.
Most of our clients simply add the small fee into their shipping and handling costs so that shipping insurance comes at no extra cost to the company.
All too often, as is with many types of insurance, prospective clients come to us AFTER they’ve incurred great loss. I suppose it’s better late than never… but it’s certainly better to be covered now, before it’s too late.