That close to a third of small business owners (SBOs) are using platforms like Amazon and eBay to reach customers isn’t much of a surprise, considering that business forecaster Kiplinger reported web sales are expected to grow by 15% this year alone.
“If you’re trying to reach a large portion of your customer base, they are shopping on Amazon and eBay, so reaching them where they’re already shopping today makes a lot of sense for small businesses,” said Jeff Somers, president of Insureon, which polled more than 2,400 business owners for a survey on online sales. “Rather than look at it as a competitive situation where you think of Amazon and eBay as competitors, you think of them as a way to extend your reach to more customers, and they’ve made it very, very easy to do that.”
That 31% of those SBOs who are selling their products online don’t have product liability insurance is, however, a concern. While only 2% have received a customer complaint over a product that caused an illness or injury, a lawsuit, with average costs anywhere between $4,000 and $190,000, can hurt a small business’s bottom line or bankrupt it completely.
There’s a bigger problem at play than just lack of awareness about this type of coverage, said Somers.
“We find that 74% of small businesses are underinsured today, so they don’t have the necessary insurance in place. They may have some insurance, but not everything they need in order to really cover their business comprehensively. Forty per cent (40%) are completely uninsured,” he told Insurance Business. “They’re not completely aware of exactly what they need in order to operate their business without risking everything that they’ve put into their business to begin with.”
Many business owners are taking the opportunity that e-marketplaces present without understanding the risk they’re undertaking when they put their product into the hands of the consumer. An inherent challenge, added Somers, is the mentality that if someone hasn’t run into an issue, like a defective product, they don’t think it will happen to them so they don’t get insurance – a tenuous position for an SBO to be in when their entire livelihood could be at stake.
“Given the fairly limited resources most small businesses have, all it takes is one claim against their business to potentially put them out of business,” said the Insureon president.
Connecting with a broker or agent who can outline what coverage an owner needs for their unique business is important, though those needs can be so varied that finding an agency to cover the gamut of risks is challenging.
“A food truck’s needs are different from a technology or IT professional, which is different than an architect, which is different than a contractor. These are all very, very different types of businesses to insure and in order to do that properly, you have to have knowledge about that industry,” said Somers. “You also have to have the products available to them to support their particular business needs.”
He recommended that brokers make their presence known to SBOs wherever they do business – online and offline.
“For those brokers that have a local presence in communities, certainly participating within the community, with small businesses… and building that awareness that you’re available to them is important.”