Understanding Amazon’s New Third-Party Seller Insurance Requirements
September 28, 2021
Scott Letourneau is the CEO of Nevada Corporate Planners, a company that helps e-commerce sellers launch their US businesses and address issues with entity formations, sales tax compliance, banking, and more. Scott is also the CEO of Sales Tax System, a firm that works with startup e-commerce sellers and retailers worldwide to help them effectively register for sales tax in the US.
Matt Lovell is a Founding Partner of Well Insurance, a full-service e-commerce insurance agency. Well Insurance specializes in helping Amazon sellers stay compliant. Matt is also a Partner at Vaughn, Geiger & Associates, a firm that delivers quality insurance solutions to individuals in Kentucky. He has more than 20 years of experience in the insurance industry and holds a bachelor’s degree from Western Kentucky University.
Here’s a glimpse of what you’ll learn:
- Matt Lovell and Scott Letourneau talk about how Amazon has started enforcing product liability requirements
- What third-party sellers need to know about complying with Amazon’s product rules
- Factors that affect the cost of product liability insurance coverage
- How to ensure that you purchase the right kind of insurance policy for your business
- The difference between getting insurance coverage using an LLC versus an EIN
- Why Amazon requires certificates of insurance from sellers and what Amazon sellers should do to lower their business risks
- Do Amazon customers care about product liability insurance?
- Scott explains what his company does and how he works with Amazon sellers
- The services Matt’s company, Well Insurance, provides to e-commerce businesses
In this episode…
Running any type of business involves some level of risk. This risk could be related to customers, suppliers, products, or the e-commerce marketplace. Additionally, different online sellers face different types of risks based on the products they sell.
So, what do Amazon sellers, both domestic and foreign, need to know about product liability requirements, purchasing insurance, and becoming Amazon compliant? According to Matt Lovell and Scott Letourneau, there are many factors that impact an e-commerce seller’s business risks — and they’re here to share their top tips for protecting your Amazon business today.
In this episode of the Buy Box Experts podcast, James Thomson is joined by Scott Letourneau from Sales Tax System and Matt Lovell from Well Insurance to discuss the recent product liability requirements being enforced by Amazon. Together, they talk about the factors that affect the cost of product liability insurance coverage, what third-party sellers need to know about staying compliant on Amazon, and their advice for reducing your e-commerce business risks. Stay tuned.
Resources mentioned in this episode:
- Buy Box Experts
- Controlling Your Brand in The Age of Amazon: The Brand Executive’s Playbook For Winning Online by James Thomson and Whitney Gibson
- James Thomson on LinkedIn
- Sales Tax System
- Nevada Corporate Planners
- Scott Letourneau on LinkedIn
- Well Insurance
- Matt Lovell on LinkedIn
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace — not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Buy Box Experts Podcast. We bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
I am James Thomson, one of the hosts of the Buy Box Experts Podcast. I’m a partner with Buy Box Experts and the former business head of the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I’m the Co-author of a couple of books on Amazon, including the recent book Controlling Your Brand in the Age of Amazon. Today’s episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. When you hire Buy Box Experts, you receive the strategy optimization and marketing performance to succeed on Amazon. We also support investors with due diligence services. Go to buyboxexperts.com to learn more. Before I introduce our guests today I want to send a big shout out to the team at GETIDA, a global leader in Amazon FBA auditing and reimbursements. GETIDA analyzes your Amazon data, reconciles your FBA inventory, and files claims for reimbursements on your behalf. To learn more, check out getida.com.
Today I’m joined by two guests. First we have Scott Letourneau, CEO of Sales Tax System, a firm that helps startup e-commerce sellers and retailers worldwide to get registered for sales tax in the states where they have nexus. Scott is also the CEO of Nevada Corporate Planners, a company that helps e-commerce sellers launch their us businesses address issues on us entity formations, sales tax and US tax compliance, US banking and complete formations. We’re also joined by Matt Lovell, a Founding Partner of Well Insurance, a full service e-commerce Insurance Agency able to shop policies with all of the insurance carriers. His firm specializes in helping Amazon sellers to become compliant with Amazon terms of services’ rules on general and product liability protection. Scott and Matt, welcome to the Buy Box Experts Podcast today.
Matt Lovell 2:14
Thank you, James, appreciate you having us.
Scott Letourneau 2:16
Great to be here, James.
James Thomson 2:18
Matt, I’ve had the opportunity to chat with you many times over the past five years. And I always finish my calls, wondering when Amazon was going to get serious about enforcing the product liability requirements that they’ve had in place for ages. And here we are now, you know, late late, halfway through, you know, 2021. And finally, at the beginning of September 2021, after 20 plus years of running its marketplace, Amazon is finally going to enforce its product liability requirements. So my question to you is for years, you’ve been the only guy in the corner trying to tell sellers to get serious about protecting their businesses. What are you thinking today?
Matt Lovell 2:56
Well, the emails went out about two weeks ago today. So we have been we’ve been slammed from that point. But it’s a you know, it’s not only a matter of satisfying the Amazon requirements, it’s also about protecting the assets of the business. My philosophy on the insurance is always been is don’t buy the insurance to just make Amazon happy and be sure you stay on their platform. But that if you’re involved in that million dollar lawsuit that, that you’ve got some protection, they’re trying to protect your brand, protect your business and everything involved with it. Lots of lots of sellers have million dollar businesses, and a lot of them don’t have any insurance coverage. I mean, that’s just a basic business one on one that I don’t see how they fail to put that in place from the start.
James Thomson 3:45
Over the past couple years, I’ve read so many stories about Amazon being sued in various states for defective products being sold by third party sellers. Why do you think Amazon is finally enforcing its own rules? What do you think it’s trying to accomplish here? Scott?
Scott Letourneau 4:00
I think what’s happening, there’s been a couple of cases in California in New York specifically. And it’s interesting, because originally the the results were against Amazon, right? You want to go after deep pockets. Yep. And so, of course, Amazon has a good legal team, as you know. And, and they would rather have that not necessarily be the case. So originally, cases were pointing the finger at Amazon, but in two cases in 2020. They were reversed where they said, you know, maybe Amazon is is potentially off the hook. And so and and then it went back to pointing the finger at Amazon again. So if at the end of the day, the writing’s on the wall, and when you go after somebody for product liability issues in getting sued, typically it’s deep pockets. So I think Amazon, kind of like with the sales tax thing they like to take, you know, a little bit of the focus out to themselves and they took care of it. So I think in this case, they they’re really saying, you know what we should make sure our, our sellers are protected, they should do the right thing. And let’s be honest, they want to protect themselves. So, and a lot of the customers are small sellers. And if I’m a customer of Amazon, and I’m buying products, my wife does every single day, you probably realize if you’re going to go after somebody for product liability, and somebody like Amazon, it could be very difficult to win that particular case. But if I go after a seller, they have a product liability insurance policy, I mean, that’s what it’s there for. So, you know, in the big picture, let’s be honest, they’re looking out for themselves. But at the end of the day, I think indirectly, this is probably best for sellers, because let’s be honest, if you’re building a real brand, this is a component, as Matt has mentioned, that is part of any business structure, if you sell a product is product liability insurance, especially these days, with all the aggregators and opportunities to sell your business, you want to buy a real business. So I think indirectly, although it’s caused some panic among sellers, I actually talked to a lady yesterday who has been selling since 2014. She didn’t know there was a requirement for product liability insurance, so she had no idea 2014. So this was a shock to her. So I think at the end of the day, it’ll turn out to be a good thing. Although sellers probably any any more expense towards compliance, it’s not their first joy in life, I would imagine.
James Thomson 6:40
Some add for the benefit of our audience to tell me more about what these new insurance requirements are. But what Amazon third party sellers are now expected to do to comply with the rules.
Matt Lovell 6:50
You know, the requirements haven’t changed, the wording on the certificates has changed just a little bit. But but the requirements have always been there, the seller needs at least a $1 million general liability policy must include products liability, must name amazon.com Services, LLC, as an additional insurer need to provide them a certificate of insurance, the named insured the mailing address, all of that information that’s it’s on the seller central account needs to match perfectly with that certificate, we’ve had a lot that have been kicked out because that they had a peel box as a milling dress, but they signed up with a with their street address when they originally signed up years ago. And so all that needs to match. But you know, the big thing is Amazon wants to be that additional insured, they want to to have some recourse under your policy, in the event that one of your products causes bodily injury or property damage.
James Thomson 7:47
So there’s been this question around domestic sellers and foreign sellers alike, if they’re selling on amazon.com they need this policy. not to go too far into this. But if I happen to not be based in the United States, but I’m selling on.com what extra wrinkles are there for me to do to have to deal with in order to comply effectively and have this insurance policy?
Matt Lovell 8:11
to do things right, they really need an LLC set up in the US and they need to run their their .com business through that LLC. Just it just helps to, to streamline things to keep things the way that the way that the business should probably run it and Scott can probably attest to that a little better than I can.
Scott Letourneau 8:33
Yeah, so to add to that is there’s some additional requirements for the non residents. So they’re a little bit more in the panic mode with this September 1 deadline. And it’s it’s really, per se if we call it a deadlines, it’s a date where there’s going to be a change to be accurate. So there’s a change. And you know, going from 10,003 months in a row to 10,001 month in a row. That’s a big change for especially new sellers, then I think the factor you have to look at too is or any seller, especially non residents, what’s the product category you’re selling. So we have a lot of clients from Australia. And there are some folks that can provide product liability insurance in other countries, but certainly many times they don’t cover certain things, for example, exercise equipment, children’s toys, supplements, items that have a much higher liability, and therefore the premiums are more for the insurance coverage. Okay. those particular folks are looking at this deadline and these extra hoops you have to set up and you want to do it properly. Of course you don’t want to just go on the internet and form an LLC for 150 bucks and have no idea what you’re telling the IRS and find out you got a text surprise. A month later, right? I’m
James Thomson 9:51
compliant with Amazon’s rules. Yeah.
Scott Letourneau 9:56
One step forward three steps backwards, right. Yeah. And we see that all the time. So we tried to anticipate all the steps to make sure you get the compliance, right. And so they have options there. But I have clients that will calibrate the, you know, if you can’t have any coverage will then your only option is to go to Matt. And then we come to us, we set it all up properly. So that’s that’s what’s been happening in a lot of those situations. And again, the September 1. Update, we should call it the big question in life is, when will it really be enforced? As as you brought up earlier, like, okay, they’re changing the rule, there’s been some court case changes. And does this mean they’re more serious about it? Probably. But when is somebody going to get that lovely? Notice that they have 3060 days to comply? Yes, yes. So there’s a so there’s, there’s more steps for those folks, separate from the US folks that it’s a little bit easier to go directly to map and get taken care of.
James Thomson 10:58
Scott, he talks about factors that might impact the actual cost of the insurance. Are there other types of big issues that sellers need to be thinking about, around what kinds of costs they can likely expect in a product liability insurance coverage?
Scott Letourneau 11:14
Well, I think the step that comes in before that, in which which I see is the challenges with like, the new sellers, like imagine you’re selling supplements, and it’s a huge niche, right. And now, the first $10,000 in sales, you need product liability insurance. And Matt can share in a moment more of those costs, but the costs are much higher, they’re not going to put anybody out of business. But if you’re a new seller just did 10,001 month, you’re not profitable, you haven’t paid yourself. Now hopefully, you have enough food from money from someone else to eat every day. So they don’t want to find out, they got to, you know, spend 3500 bucks on product liability insurance. So those sellers probably are have to navigate a little bit more of the the overall costs of their business and things of that nature. So the factors of besides you know, the type of product and the risk that comes involved with the insurance, I think Matt can comment on what other factors may come into play that would impact maybe the length of time to get coverage? I would add that, you know, some folks will, it’s a minor thing, but it’s a factor that they will you know, what state should I incorporate? If you live in the US, Delaware’s popular mainly for people going public, which is certainly not Amazon sellers, but it’s a knee jerk. Right. But you know, I asked Matt, you know, do those costs? Are they different in the state you pick to incorporate these? Yeah, you know, Delaware has a tendency to be higher. So nobody would have anticipated that factor. So that’s something that could come into play. I’m sure Matt has some other thoughts that that are more specific to either the timeframe or costs.
James Thomson 13:04
So man, I’m an Amazon seller, what kinds of major factors are going to impact the cost of the insurance policy that I have to get?
Matt Lovell 13:12
The first major factor is going to be are you a reseller? Or are you a brand and a private label? Okay, are you importing those products from China, if you are importing those products from China, you essentially become the manufacturer of those products, even though you don’t physically have any hands on dealings with that manufacturing process. You can’t subrogate back against a Chinese manufacturer. So you assume all the products liability. If that product were to fail, if that product were to cause someone to be injured, you know, the battery ignites burns the house down, you become the manufacturer, and you assume all the products liability. So you need to be classified correctly. We’ve had a lot of a lot of customers here recently, that that are, they’re being classified as resellers, when they’re actually they’re the manufacturer of the products. And that that greatly, you know, greatly affects the rates. They go from, you know, $500 a year on a policy to $5,000. Well, they see, well, someone can write me a $500 policy. What Why would I go with that? Well, because you’re not covered correctly, right? You’re you may satisfy Amazon’s requirements, but you’re not protecting your business whatsoever. And it’s just, it’s hard to get people to understand that, that they’re not reselling that product that they are the manufacturer and that you know that a bit affects the race.
James Thomson 14:33
So let me ask you this. Let’s say I’m an Amazon seller, I’ve never been compliant with this. Now I need to rush and go get myself liability insurance. What are some of the issues that I should be considering before I purchase the insurance and make sure that I get the right Certificate of insurance over to Amazon.
Matt Lovell 14:53
You need to make sure that the agent that you’re dealing with, first of all understands e-commerce it’s a very specialized field. Your agent down the street that you write your home in your car through, probably doesn’t understand it. They don’t understand how you’re sourcing your products. They don’t understand how you’re listing how you’re marketing them. Understand what a three PL warehouse is. There’s just a lot of factors that go into play there. And just just dealing with someone that understands what, you know, FBA means, you know, be sure that they know that you’re manufacturing that you’re importing those products. Or if you’re if you’re reselling, I mean, just Just be sure that you have to ask questions, and you have to give information, you can’t be you can’t withhold information and expect to be covered properly, everything needs to be forthright. And, you know, everything needs to be upfront and laid on the table. And then where the chips fall, the chips fall from that point.
James Thomson 15:45
So, Matt and Scott, you’ve both talked a little bit about this concept of you can buy a policy to meet Amazon’s requirements, but it may not necessarily cover your business properly. I’m curious about if I go out and I do buy the right kind of policy for the right kind of representing the right kind of seller that I am. How do I make sure that I actually am protected appropriately? And here’s where my question is coming from. I bought car insurance, I bought homeowners insurance. And when I start reading the details, I discover there’s all these carve outs for all sorts of crazy stuff that actually is likely to happen. And so how do I as a seller anticipate? What are the five or 10 most likely ways in which I’m going to need to exercise that insurance policy and how do I make sure that policy is protecting me appropriately?
Matt Lovell 16:31
My recommendation is is fine legit. You can talk to pick up phone call, send them an email, ask them. What am I what are the exclusions Look, look at read the policy forums. Insurance is a very much a relationship based business. You know, you can go online, you can point and click and hit drop down boxes and get submitted get a right yep, yep. Thank you have coverage. But do you really have coverage? Do you know what those limits mean? how they work for you? call somebody who does you know pick pick up the phone call me. And I’ll I mean, I get free consultations. I’ll talk to you about limits and how they apply to your business, how they cover your business and what they do. And don’t do that. That’s the thing is just a fancy way that understands it and ask questions. It’s the big thing.
James Thomson 17:15
Amazon has given sellers not not a lot of time to finally get their act together. Right, I pick up the phone today and I start dialing for insurance, there’s still going to be some time required for the brokers to be able to shop those rates and for the carrier’s to come back and say okay, here’s the coverage that we’re willing to provide. Give me a rule of thumb in terms of seller starting today. How long should they expect to wait, in order to do the full process and get themselves coverage? Is that a two week process a four week process?
Matt Lovell 17:51
So someone calls me today and that they take the time to fill our format on our website. It comes directly to me we start shopping and immediately. Yep, lots of cases we’ll have a quote back within the hour. Get the paperwork over the detailed email of the description of what’s covered what’s not covered. I can send the paperwork over to get it signed. It’s I mean, it’s a matter of hours, not days. Okay, very, very quick turnaround time.
James Thomson 18:15
So the deadlines that Amazon’s put in place sellers, if they finally decide they need to do something about it, they can do something about it and do something about it quickly. No, absolutely. No question. Okay. Scott, I want to talk a little bit more about the link between having a US LLC and being able to get an insurance quote that meets Amazon’s requirements. What are some of the issues that come into play when an EA n us EA n e i n number is used with the US LLC.
Scott Letourneau 18:47
So if we talk about us residents, it’s a little bit easier because of course, you’re likely you’re gonna have a social security number. So those Ei n numbers if even we have some sellers, still hard to believer operate as sole proprietorships they now they want to get insurance policy and they’re thinking Well, I do I want to mining maybe this time to form their company right? Now they do that they form a company within with the with a social security number. Of course, we can go online to get the VI n basically, immediately after the SS for form is filled out. So we can do that. We take a screenshot of that. Obviously, there’s some areas the IRS does send a an official letter, about three weeks later, it comes in the mail, sometimes that doesn’t impact this but impacts things like banking or other things. So that’s fairly straightforward. You know, usually it’s more what how should my structure be taxed? And there’s LLCs, four different options. So we walk through those variables that the different subject that does impact timeframe, because as I was talking to Matt about asking the same questions you did, what’s the biggest thing that slows down the process, and it’s the ability of someone to fill out the form correctly. get the process started. So okay, rightfully so we’re, you know, panic dinner rush and we want to get it submitted, well, then you miss something that goes to a different box, and then somebody has to review it, send it back. So those are things you want to anticipate that impacted obviously, when we get to non residents. That’s a different ballgame because the IRS changed their rules a year ago, we have a lot of foreign sellers that already have a company in place. Some of them have an Ei n number, because some actually were in compliance with sales tax previously, but now Amazon takes it over, they’ve got to shut down most of those accounts, but they have an EIN. And for the foreign company. Now, if we set up a US entity, the US entity has its own EIN, right? Well, the challenge with COVID, as we know, it’s impacted, especially some government agencies and, and the International division of the IRS that does Ei ns, they’ve, for whatever reason that they must be like down to six people. I mean, it’s something really low because it’s taking up to 45, business days, di n now, and this has been since about June of last year, it’s taking that long. Now the good news is with with the insurance part, Matt can share a little bit about that, that as long as we’re having applied for, he can move forward on his steps. So that dramatically changes the process. So again, you fill out our form correctly. And we have a video when we have samples to try to speed that up for you to keep it simple. Even though there’s some steps involved. Once they submitted, we formed the entity and several states are within about 48 hours, and we get the SS four on its way faxed to the IRS, then we can kind of transfer you over to Matt to get the ball keep the ball rolling. So that’s that that is a it helps the situation dramatically. Of course, the sellers naturally. Especially if they’re making a transition, they have concerns about other things about how do I update Amazon after my gonna, is my account going to be suspended?
James Thomson 22:10
That was my next question. If I had my social security number in there, and now I’ve got to put a different different company number in there. Is Amazon gonna potentially put me on hold thinking that I know there’s fraud going on in my account?
Scott Letourneau 22:26
Yeah, as as Matt mentioned earlier, you want things to line up right with Amazon, they have some algorithms, there’s some natural things that should match. And I did some training last year with the amazon seller central reps in the EU about us sales tax. And in exchange, I said, I had a list of these questions. I go tell me exactly how your internal algorithms work on this because I I want to know that. So basically, you want to really make sure like addresses matchup between bank accounts, whether that’s Payoneer or somebody, the business address and sweet, you know, sweet numbers, misspellings all these things, great issues, as we know. So if those things line up, then you’re basically retaking the tax interview. And the tax interview is somewhat simple. Except when you get to, let’s say a single member LLC owned by a foreign entity, Amazon kind of has a different issue in their tax interview about single member LLC is disregarded. So you want to get those dots to line up with Amazon. And we also want to keep the good old IRS in mind. Yep. So if we check all the boxes properly, then we get through them, we’re in good shape. If we you miss a couple of steps on that end of it, then that’s where the sellers get concerned about, of course, my account is either not activated or or heaven forbid, the biggest fear of a lot of sellers not as much us is the dreaded utility bill that matches the company name. And they’ve Amazon has gotten smarter, as you know, over periods of time, and they’ve tightened up what can be a utility bill there. They want to get to more real companies. So that we have a solution for it. But we’d like to avoid that and do it right the first time, if that makes sense.
James Thomson 24:22
I want to shift gears a little bit and I want to come back to you, Matt, around the policy itself. I’m an Amazon seller, my business is growing significantly year to year, I’m probably going to have to tell you, what level of sales I have, and what level sales I have now versus what I have at the end of the year might be quite different. When you start looking at different types of issues that I may have good issues that I may have as a seller. How do I tell you what are the things I need to tell you that I may not realize I need to tell you that are going to ultimately impact the policy that I need and Making sure that I have the appropriate level of protection,
Matt Lovell 25:02
right? Well, once we’ve had a chance to evaluate the products and figure out where the where the policy needs to be classified, the next rating factor is, is like you said, the gross sales, and then those will be an estimate for the next the next 12 months. So basically, August 2021, to August 2022. And, you know, if we estimate, let’s say, we estimate a million dollars, and you actually do 1.5, you have been, then the company will come back at the end of the policy term next year, and they will do a sales on that one of those looking to run a quick book report or an accounting report, and they want to see what’s your actual sales part for those policy dates. And if they’re over, then you’re gonna have some some excess premium. If they’re under than, then there could be a credit back. So it works. It works both ways, unless it’s a minimum premium policy, for whatever reasons, but those are easy. And I have a lot of sellers that, you know, they say, Well, I think I’m gonna do X number this year. But you know, I really hope that, you know, we take off and we really grow and yeah, so I’ll, I’ll mark my calendar for six months out, just reach out and say, Hey, you know, we’ve got, we have x, you know, estimated error, Are you still on track for that? Or do we need to make a policy change? Okay, real, real simple change, and it’s, uh, you know, it’s good to keep in contact with with some of those guys that because they know, with businesses, these these e-commerce business has changed so rapidly, and the growth it goes, it goes crazy sometimes. So it’s, uh, but that’s, that’s something that they will do and will provide him will help through that process. When I
James Thomson 26:32
think about costs that I’m going to be paying to operate my business, you know, I’ve got the Amazon commissions, I’ve got advertising, I’ve got fulfillment costs. Is there some general range rule of thumb that I can use around the types of costs that insurance may play into my overall business business operating expenses?
Matt Lovell 26:52
No, there’s I mean, just because there’s so many variables, the variables of the product type variables of where you’re sourcing those from the gross sales, there’s really not a not an X percentage that you could put inside this is, you know, you can, you can ballpark this for your expense. Okay. Just it’s just that there’s so many variables that go on, it’s just it’s not not an easy, easy thing to, to guesstimate on that.
James Thomson 27:18
Well, let me ask you this. Many years ago, I was a seller on Amazon and I to say that I knew what I was doing when it came to things like insurance, I did not, I did have liability insurance, I got this thing called a certificate of insurance. But I don’t really understand what it was meant to do. I just know that I had to submit it and have it ready to go. Tell us a little bit more for those who are not as familiar with the paperwork and what’s needed along the way to keep things happy with Amazon. How What does Amazon need the CIO for? What’s it for? How do they verify it? what’s what’s the future gonna look like here? As far as you know?
Matt Lovell 27:55
Well, a CEO’s short for certificate of insurance that Amazon does requiring and what that is, that’s basically a snapshot of your a one page snapshot of your policy. It shows the the agent that writes the policy, it shows your your business name and address. Yep, it shows the company that writes the policy. It shows your your policy number, your whether it’s an occurrence or claims might form, the policy date, the liability limits if there’s a deductible. And then in the bottom of it, that’s where there’s also a box so that we need to check for the additional insured. But at the bottom, if that’s where you that amazon.com Services, LLC, yes, in their specific wording and address will be listed, assigned by the agent. And again, it’s just a, it’s just a, it’s a one page snapshot of the actual policy that’s in force.
James Thomson 28:45
So I’ve got the paperwork. I’ve checked the box with Amazon. You’re also telling me Oh, I’ve got the right level of service. I’ve checked the box in terms of doing what’s appropriate for my business today. But now that’s got me thinking, Wait a minute, are there things that I can do to reduce the overall risk of my business? Should I be auditing what I carry in like my catalog? How should I be thinking through how I could reduce easy to reduce risk within my business? Give me some perspective on how to think that through.
Matt Lovell 29:16
The one big big thing that is often required but but can help on the right is the safety test. If you’re importing products from China, be sure you’re doing your safety testing and penson those safety testing reports to your agent, you know that they can have some discussions with the underwriter which which could result in some some discounts or some premium savings. If you can prove that, hey, my product is you know, has been tested, it’s you know, lit free, it’s you know, children approved, or whatever the case may be. That’s something you can definitely, definitely send over that could help them the premiums,
James Thomson 29:53
so that helps reduce my premiums. But I guess I’m asking a more fundamental question around what Should I as a seller be doing to look for risk within my business that may ultimately result in me being sued whether or not I’ve got the proper coverage necessary to protect against that. At the end of the day? Nobody wants to be sued. Right? So how do I think about best practices to minimize risk in my business? I realize this is silly in some ways to be asking you, but but we’re all inherently creating risk by going to market every day. And so that the question then becomes, how do I go looking for risk, so I can decide whether it’s acceptable risk.
Matt Lovell 30:34
As far as the the categories that are generally harder to insure, those will be you know, baby, infant, children, toys all the way up to, you know, any of those products that involve, you know, children or young adults, anywhere from from from toys, to fingernail clippers, medical devices, supplements, health and nutrition, sporting goods, sporting equipment. All of those are generally harder to insure than your typical just just household products, groceries are relatively easy. You know, just but that those those other risks that none of the standard carriers want. And that’s where we have to reach out to that the brokers and shopping on that on that side of things, and then the rights go along with the exposure.
James Thomson 31:28
We’ve talked about Amazon, we’ve talked about Amazon sellers. I’d like to spend a few minutes and talk about Amazon customers. Do you think Amazon customers will be pleased or even pay attention to the fact that third party sellers now actually have proper liability insurance? Are things going to change in the way that consumers even see the offering from these third party sellers?
Matt Lovell 31:53
In my opinion, no, I don’t know. I don’t know that a lot of people understand that. Amazon is a bunch of individual sellers to begin with. But if you did a poll to the general public, they think Amazon is selling most of these products. So you know, I don’t think I don’t think requiring the seller to have a products liability insurance policy changes the thought process of the general public opinion. Scott? Yeah, I
Scott Letourneau 32:23
would agree with that. Because as a customer, you got to step into your buying a product or service, you know, I not necessarily I buy this power tool, you know, what’s the product liability, you know, limits on this company in case my, you know, 14 year old daughter uses it, and something goes awry? Yeah. What kind of a check? Am I going to get? Um, you know, I, I anticipate things in life that not that far. So I don’t think that’s going to come into play unless it came to I could see perhaps, you know, would it be possible exercise equipment, where it’s something significant? Is it safe? Is it this? You know, but again, what I look to I look to the reviews before I look to, you know, and if they had a $5 million policy coverage, I might be, why do they have a 5 million? I mean, maybe that’s a concern? I you know, you’d have to set right, yeah, you’re kind of like, maybe there is some real concerns here, I mean, is a certain percentage of the US population, they’re ambulance chasers, and, you know, they’re gonna, you know, try to buy a product and see it’s a free payday. But that’s such a small percentage, but I don’t see it making much of a difference in the big picture as far as sales and results of sales. Obviously, if you get suspended and you can’t sell, that’s going to be a problem. But in the big picture, I don’t see it making a big impact.
James Thomson 33:47
So let me ask you, Matt, what what have Amazon customers had to do in the past, to seek damages? If a third party sellers product ended up being defective? We’ve talked about the fact that there’s been these court cases, but tell me what what are Amazon customers actually doing? Are they actually collecting on dollars because their finger got broken, or, you know, they ended up with a rash or something horrible happened as a result of consuming a third party sellers product?
Matt Lovell 34:17
You know, I’m not I’m not 100% certain as far as what the process has been. But I assume if someone has been injured by a product or a property damage, that they’ve they’ve they’ve hired an attorney and that attorney has brought anyone and everyone into that lawsuit that they possibly could, whether that’s the seller, the vendor, Amazon, anybody in between that they could track down and associate with that product. And if you don’t have an insurance policy, you’re on your own to defend yourself and then pay any judgments that you can be found negligent of
James Thomson 34:54
what’s likely on the horizon of emerging insurance requirements for sellers on Amazon, but what do you think gonna do next. Let’s assume they do enforce what’s next.
Matt Lovell 35:08
I think you see a lot of people that are scrambling to get a policy in place, because the bottom line is, there’s a lot of sellers out there that didn’t think they needed it didn’t, they weren’t gonna buy it until Amazon basically said you had to write. So I think there’s gonna be there’s gonna be a lot of scramble in the marketplace here in the in the near future.
James Thomson 35:30
I want to close out our discussion today by asking each of you to talk a little bit about what your companies do. We’ve talked about, obviously, the impact of having to have product liability insurance in place, but you’re both, you’re both dealing with third party sellers in slightly different ways. Scott, take us through your companies and how you work with Amazon sellers today.
Scott Letourneau 35:52
So there’s two parts first is the foundation of your Amazon business, which is making sure when we form a company an LLC or corporation, it’s a complete foundation most LLC is formed online actually of zero protection based upon court cases piercing the entity veil, they just form the article VI and that’s it. We don’t sell you a car without brakes. Let’s put it that way. So yes, yes, we want to make sure if we start with something’s complete, we just don’t get in the door. So we also want to anticipate the next two or three moves ahead. So when you’re going to Amazon, updating the accounts, making that transition, we can help in that area. We also obviously with the the non resident market, we work with different tax attorneys and tax treaties, and we have CPAs that work behind the scenes, because we know it’s like a four by four relay race, you got to pass the baton. And and you know, to the next professional and we make sure that the tax people working with we do things properly an RN to a don’t create a problem on the back end. So we do the formations. We can do those in all 50 states we’ve been doing for 24 years. And we know all the ins and outs of the things that can cause issues. And on the sales tax side, we have a lot of Amazon sellers that might want to diversify, and they might open up a Shopify store, for example. And of course, sales taxes flip flopped over the last couple of years. It used to be Amazon sellers had an issue with FBA physical Nexus, now they’re a marketplace. But now because of economic Nexus, it’s it’s potentially like selling in 45 different countries with thresholds. And there’s 26 states that have thresholds of 200 transactions or less. And you know, a lot of people are behind. So adding Shopify makes sense for your own your website, but it adds a layer of complexity so we can help simplify that. Good news. Everybody’s probably a little bit behind on sales tax, it’s just a matter of, kind of when you get in compliance, the main pure Amazon sellers are pretty much in good shape. Although they’re states like Florida, for example, that they have complete amnesty that expires next month. And if you’ve been selling for four or five years and you never registered in Florida, it’s a chance to very inexpensively wipe the slate clean for Florida.
James Thomson 38:11
And so those are some things that we can help with. So pass the baton from you form the company to now I need product liability insurance. Matt, take us through Well Insurance and what you do, what’s the full scope of what you do for e-commerce sellers?
Matt Lovell 38:25
Well Insurance is an independent insurance agency. We’re able to shop that particular account to find the best, the best coverage and the best rate. We specialize in e-commerce. We’ve been in the e-commerce space for five years now. We can do the general products liability, we can do the inventory in threepio. If you have an employee working in your personal warehouse, we can do the workman’s comp we can do business auto. We also write a lot of ocean marine cargo. We can cover those shipments coming from China while they’re import while they’re being physically transported and also when the warehouse so we run a basically a full service independent insurance agency that specializes in caters to e-commerce sellers. We can also help Amazon sellers become compliant with the new record
James Thomson 39:17
the new rules compliance. That is the key word today children compliant. Scott and Matt, I want to thank you both for joining us today. For listeners interested in learning more about Matt’s Well Insurance, please check out well-insurance.com. To learn more about Scott’s firm Launch With Confidence, check out www.launchwithconfidence.com. Thanks for joining us today and join us again next time on the Buy Box Experts Podcast. Today’s episode is brought to you by GETIDA. GETIDA is a global leader in Amazon FBA auditing and reimbursements. GETIDA analyzes your Amazon data, reconciles your FBA inventory, and files claims and reimbursements on your behalf. No obligations, no hidden fees, just GETIDA recovering your money. GETIDA helps you get your money back into your pockets so you can focus on investing in more inventory and growing your business. To learn more, check out getida.com. That’s getida.com.
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