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With an increase in shipments during peak season comes a 41% higher risk of lost, damaged, or stolen parcels. A major frustration for customers, and a real financial risk for e-commerce businesses like yours. The solution? To insure your shipments. Why? Because shipping protection significantly reduces the risk of losing a customer due to a lost parcel.

What is parcel insurance?

Also known as shipping insurance, shipping protection or shipping coverage, package insurance is a service offered either directly by the carriers or third-party insurance providers. It allows you to safeguard your shipments against loss, theft, or damage during transit. By purchasing shipping insurance, you essentially pay a fee to insure the value of your shipped items. It allows you to mitigate the risks and prevent your customers from having a bad experience with your store. Especially during peak season, shipping protection provides peace of mind for shoppers and e-commerce business owners alike. 

Domestic and international carriers provide coverage for most packages of a specific value through their shipping services. If you decide not to opt for shipping protection, be sure to thoroughly review the coverage and terms and conditions offered by different carriers to determine which one aligns best with your requirements.

How does parcel insurance work for e-commerce owners?

Shipping insurance safeguards e-commerce businesses against potential financial losses. Typically, it works like this:

You purchase the parcel insurance

As an e-commerce business owner, you have the option to purchase shipping insurance directly from shipping carriers or via third-party insurance providers. Ideally, you already have a form of shipping protection integrated with your shipping software. If that is the case, you can either insure parcels manually or include the shipping protection in your shipping rules. The cost is typically made up of a percentage of the declared value of the items that are being shipped.

You declare the shipping value

This declared value serves as the basis for calculating your insurance coverage. It should accurately reflect the total worth of the items in the shipment.

You ship the items to your customer

You send out the package as usual through the chosen shipping carrier, ensuring that it’s properly packaged and labeled. The carrier is responsible for the safe and timely delivery of the shipment.

You document and keep track of the shipping process 

It is highly recommended that you maintain detailed records, including tracking numbers and invoices, as well as photos of damaged parcels to substantiate your claim when you need to file one.

You file a claim with the shipping insurance

If a shipment ends up getting lost, damaged, or stolen during transit, you, as an e-commerce business owner, can file a claim with the shipping carrier or the third-party insurance provider. Make sure to file your claim within the specified time frame after the incident.

Your insurance claim is being processed

The insurance provider will assess your claim and may request additional documentation like tracking records or images of the damaged parcel to verify the theft, loss or damage. Once the claim is approved, your business will receive compensation for the declared value of the items, up to the coverage limit specified in your insurance policy.

You receive compensation from the insurance 

Depending on the circumstances and your business’s own policies, this compensation can help you to cover the cost of replacing the stolen, lost or damaged items, by either refunding the customer or reshipping the order to them.

A cardboard box with the hand-written word “FRAGILE” on it, the hand holding the marker still in the pictureWhat to keep in mind when looking for shipping protection

Granted, it’s probably not an exciting read, but as a business owner, you have to make sure you carefully review the terms and conditions of your insurance policy. Make sure you understand what is covered, what is excluded, if there are any limitations, and what obligations you have, if any.

When choosing a shipping protection provider, this is important to evaluate the maximum coverage offered to align with your business needs. Especially, if you’re selling unique, irreplaceable, high-value items, like electronics, or ship a high volume of parcels, like in the fashion industry. In either case, you need to make sure that you have the right shipping insurance for your business. 

Are you shipping internationally? Then shipping insurance with worldwide coverage is a must. It helps you to navigate the problems that can occur when shipping across borders, such as customs issues, regulations, or longer delivery times.

It can be helpful to assess the insurance provider’s reputation through customer testimonials and ratings. This way, you can find out how long claims take to be paid out, and how happy others are with the service. Last but not least: consider ease of integration and compatibility with your existing fulfilment processes when choosing a shipping protection provider. After all, you want the process of insuring your parcels to be as smooth and quick as placing an item in your shopping cart or setting up automated shipping rules.

But is parcel insurance worth it? 

A fair question, after having read about all the factors to consider when choosing the right shipping insurance for your business.

With the sales volume going up during peak season, shipping volumes are going up as well. Which means even more risk of damaged, lost and stolen packages. The likelihood of a package being lost during shipping is at its peak in November, with the chances of a parcel going missing rising by up to 40% compared to a typical month. December comes next, with a 21% greater risk of packages getting lost.

Apart from your financial loss, a failed or compromised order delivery impacts the customer experience negatively. And with that, your brand reputation.

When you weigh up the pros and cons, there’s no doubt that shipping protection is a necessity during peak season. This especially stands when you consider that replacing an uninsured parcel costs up to 17 times more than the initial shipment! 

Profit from cost savings with shipping protection 

Investing in shipping protection is always recommended and even more so during busy periods like Black Friday, Cyber Monday or Christmas. While there is a cost associated with it, shipping protection leads to cost savings in the long run, as it prevents you from having to refund customers out of your own pocket. Indeed, when an order does not reach its intended destination, the online store bears the legal responsibility to reimburse the purchase price. In such instances, 55% of customers opt for a refund, while 35% prefer to receive their initial order.

If you run a fashion or electronics business, you know that these costs can skyrocket quite rapidly. Both industries are also more likely to receive claims from customers due to stolen, lost or damaged goods.

Not convinced yet? Let’s do the math. Imagine that you sell wine glasses with an average order value of €199, and you ship 1,000 packages per month. Based on industry standards, 7% of fragile goods are delivered in “poor” or damaged condition. That means you’re looking at a loss of €13,930 per month! 

Based on our own Sendcloud Shipping Protection rates, the scenario above could be covered for €950. This alone would mean a whooping €12,980 of extra costs saved per month. Not bad, huh?

Why shipping protection is more than worth the investment

Apart from the cost and financial risk, think of the time spent managing the claim with the insurance, the carrier, and the unhappy customer who has just left a negative review. Think of the hassle of reshipping the entire order, replacing it, or providing a refund or a voucher. All that to try and save what little is left of the customer’s trust in your brand.

So, with reliable shipping protection, you make sure that your customers are appropriately compensated when they do not receive their orders in good condition or on time for events like Christmas. You also make sure to save your brand’s reputation and protect your business from unnecessary risks.

A white porcelain piggy bank with a couple of banknotes stuffed into itProtect your parcels and enhance your brand’s reputation

By partnering with a shipping insurance provider, you demonstrate your dedication to providing exceptional customer service. The inclusion of shipping insurance shows that you value the trust your customers place in your business and their investment in your products. This commitment to protecting shipments against theft and damage enhances your brand’s reputation for reliability and professionalism and makes your e-commerce business more appealing to potential customers. During, but especially after peak season!

Finally, efficient shipping protection gives you a competitive edge in the e-commerce market. It can set your business apart from competitors who don’t offer shipping protection. Seize the opportunity to attract customers who prioritize secure and worry-free shipping of their products.

If you want to know more about the benefits of shipping insurance for your e-commerce business, take a look at our ultimate guide to safeguard your shipments.

Protect yourself from peak season parcel panic

By investing in shipping insurance, you can provide peace of mind to both yourself and your customers, even during peak season. Not only does it save you from potential financial losses, but it also enhances customer satisfaction and retention, and helps to build a strong brand reputation. 

Make sure your business is well-prepared for the upcoming Peak Season 2023 by securing the necessary shipping protection. It’s a must-have investment that can make a significant difference in ensuring a smooth and successful holiday season for your business.

Looking for a way to automate your shipping process, including protection for all types of shipments with claims processing in record time? Sendcloud might become your best ally. Book a call and find out how Sendcloud Shipping Protection can provide a streamlined and centralized protected shipping solution for you – within a single software tool!

Mickaël Benamran

Mickaël works as an e-commerce and logistics specialist at Sendcloud, and keeps a close eye on the latest trends in the sector. Sharing tips and best practice, he's keen to help online retailers develop their strategy and grow their business online!

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