How the Demand for Faster Delivery Presents New Insurance Risk

How the Demand for Faster Delivery Presents New Insurance Risk
We’ve talked about the rise of the “sharing economy” and how this exposes businesses and consumers to new types of insurance risk. One consumer trend that’s impossible to ignore is the demand for same-day delivery for retailers.
Considering that today’s consumers prefer to make purchases online instead of from brick-and-mortar store locations, retailers need to embrace the e-commerce trend to succeed. Research reveals that 80 percent of American consumers have made an online purchase in the past month. However, in order to compete in the e-commerce world, retailers need to offer fast delivery options. Consumers consider Amazon Prime’s 2-day delivery (or less) to be the standard when purchasing products online.

How Retailers Are Meeting the Demand for Faster Delivery
As retailers look to speed up deliveries for online purchases, they have a few options:

1. Use a traditional shipping partner.
A proven way to get goods to consumers safely and quickly is to use a traditional shipping partner such as UPS or FedEx. These shipping partners are reputable, use the latest technology to improve delivery speed, and offer quality standards. On the downside, traditional shipping partners are typically more expensive.

2. Use a ride-and-delivery sharing service.
A ride-and-delivery sharing service is a newer phenomenon that is quickly gaining traction with retailers. This type of service typically relies on freelance drivers to deliver the goods to consumers. The advantages of a ride-and-delivery sharing service are the swift delivery times and cost savings. Using a ride-and-delivery sharing service is an average of 44 percent less expensive than using a traditional shipping partner.

3. Have their employees make deliveries.
While less common, some retailers are choosing to leverage their existing employees to make deliveries. Instead of having to pay a third party to make deliveries, these retailers are able to save costs by having employees that are already on their payroll to make deliveries.

How the Demand for Faster Delivery Presents New Insurance Risk
When retailers choose to utilize a ride-and-delivery sharing service or leverage their existing employees to make deliveries, new types of insurance risks are created.

The challenge with a ride-and-delivery sharing service is that retailers are not always sure about the quality of standards used because these services typically rely on freelance drivers to complete the deliveries. This creates the potential for inconsistencies in the quality of drivers and types of vehicles used. In some cases, the only face-to-face interaction that consumers have with a retailer is the delivery person. If the delivery person is unprofessional, delivers the product late, or delivers a damaged product, the retailer will not be presented in a positive light. Retailers that choose to use a ride-and-delivery sharing service should have their insurance carrier review their delivery plans to identify any gaps in coverage.

While leveraging employees to make deliveries seems like a simple solution at first glance, it creates a myriad of exposure for retailers. If employees are allowed to use their own vehicles to make deliveries, driving records need to first be assessed to determine driver eligibility. These retailers should also speak with their insurance carrier about increasing liability coverage to include employee drivers.

Our team at Insurance Risk Services has more than 35 years of partnering with property and casualty insurance carriers to provide them with accurate underwriting support. Contact us to learn more about how we can help you to make more informed decisions in today’s ever-changing risk environment.