In USA, from 1 September 2021, Amazon has rolled out a new scheme for product liability insurance. Under this new scheme Amazon announced its intention to resolve and pay for valid property damage and personal injury claims as a concession to customers affected by defective products sold by sellers through Amazon.com. This new scheme is an extension of the A-to-Z Guarantee return process that Amazon launched over 20 years ago.
Amazon requires sellers whose monthly store sales are more than US$10,000 to purchase product liability insurance. Product compliance is imminent, and sellers need to prepare early! Today EU-REP-Service.de compiled a list of frequently asked questions about Amazon product liability insurance which is currently limited to Amazon US sellers.
We do not get clear confirmation that this product liability insurance policy will extend to Amazon Europe. Currently we are monitoring the updates of the proposed General Product Safety Regulation by the European Commission. We see a high possibility that the product liability insurance policy of Amazon US will be applicable to Amazon in Europe soon.
Meanwhile, the European Commission also published a new draft Regulation on general product safety (GPSR) on 30 June 2021. It is intended to substantially amend the existing General Product Safety Directive which has been in force since 2001.
Proposed updates on new General Product Safety Regulation by EU
The General Product Safety Regulation seeks to introduce specific new product safety obligations for online marketplaces given their place in the modern product supply chain. It would make some voluntary measures under the Product Safety Pledge mandatory. In addition, online marketplaces should also:
- be obliged to act with “due care” on product safety and to prevent the sale of dangerous products on their platforms such as setting up internal monitoring mechanisms for handling product safety issues and conducting additional due diligence for content hosted concerning the safety of products;
- be required to collect information relating to trader names, trademarks, addresses and other traceability information for all products listed on their platforms;
- be required to establish a single contact point allowing for direct communication with market surveillance authorities on product safety issues and register a single contact point with the EU Safety Gate portal;
- be obliged to respond to communications from the relevant market surveillance authority within binding timeframes e.g. two working days to act upon an order from a regulator referring to a dangerous product.
What is Amazon Product Liability Insurance?
Amazon Product Liability Insurance mainly protects the personal injury and property loss of a third party caused by the company in the process of operating and selling products. If Amazon sellers sell products that cause personal injury and property damage to a third party, they need to bear legal compensation liability. In the United States, this legal compensation liability is much higher than in other regions. If the seller purchases product liability insurance, then the risk can be passed on and the insurance company can help compensate.
What is the function of this product liability insurance?
If there is no product liability insurance, it is easier for consumers to demand high compensation from Amazon after using the product for injury or loss, and Amazon has limited control over sellers (often directly deactivating the account). Especially for large amounts of compensation, generally the litigation time for claims is longer, and in the end, Amazon as a platform, may have to bear greater liability for compensation.
The purpose of purchasing this product liability insurance is to improve the protection mechanism of the platform, improve the shopping experience of consumers. Of course, the cost of this insurance will be paid by the seller.
Which sellers need to purchase this product liability insurance?
According to Amazon’s email notification received by the seller, product liability insurance is required for a single monthly sale of US$10,000 in the United States.
How much does it cost to buy product liability insurance? What is it related to?
According to the underwriting pricing of insurance companies, factors affecting premiums include product classification, risk level, annual sales, sales sites (regions), past losses and other factors. In addition, there are certain differences in the cost assessment of different insurance companies.
In principle, the premium level from low to high is
- home textiles (photo frames, mirrors, etc.) ;
- general non-high-risk furniture & lamps (excluding halogen lamps and Christmas decoration lights);
- high-risk furniture (high stools, infant furniture) , folding furniture, lift chairs, etc.;
- sun umbrellas, bathroom products;
- electric fireplaces, auto parts, etc.
In addition, the cost of purchasing insurance is also related to the sales of the store. The sales of the store exceed $10,000, $100,000, $500,000. The larger the sales revenue, the higher the premium may be. You need to specify the insurance plan according to the seller’s specific situation.
Is this product liability insurance notice for certain categories or all sellers?
At present, many categories have been notified that they need to purchase insurance, regardless of whether the risk factor is high or low, and some old accounts registered in 2016 have also received notifications. It is expected that all product requirements will be popularized in the future.
Only Amazon sellers in the US need to purchase product liability insurance?
At present, it seems that there is only this requirement for the US Amazon site. However, some sellers had consulted Amazon customer service before, and the response was that the insurance policy is applicable to the global market. There is currently no update that sellers on other regions/sites have received this notification, and the details are subject to further verification.
Do I have to purchase product liability insurance for Amazon stores registered by American companies?
Yes, regardless of whether it is an Amazon store registered by a European company, a Chinese company or by a US company, sellers at Amazon US store all received the same notification.
Do I have to purchase the product liability insurance when I receive the notification?
Yes, once the US store receives the insurance email sent by Amazon, it must be uploaded within the specified time, otherwise Amazon will freeze the store balance withdrawal in the first stage, and the products of the store in the second stage are not allowed to be sold. The sales revenue has reached $10,000, but the email notification has not been received, do I need to buy insurance?
If you haven’t received Amazon’s notification to buy a product liability insurance, you can just wait until the policy becomes clearer to decide.
Multi-account operation, I have currently 3 stores on Amazon US, do I need to buy 3 insurances?
Yes, insurance is insured against the main body of each store.
Can I buy product liability insurance without a business license?
You need to provide a business license, you can’t buy it without a business license.
Can I buy the product liability insurance for an account registered with personal information?
No, because product liability insurance is for business customers.
My supplier has already bought a product liability insurance, do I need to buy it again?
Yes, in accordance with Amazon’s requirements, the policy holder must match the name of the legal entity provided to Amazon.
If the product liability insurance is purchased once, is it valid forever?
No, just like the life insurance we buy in personal life, we extend the insurance and pay it once a year.
What documents are needed to purchase product liability insurance?
Company business license, legal person identification information, national warehouse address, phone number, product list, etc.
How long does it take to purchase the product liability insurance?
About 5 to 7 working days.
What is the form of the product liability insurance policy/certificate?
After the seller purchases a product liability insurance, he will usually get an insurance policy and an insurance certificate. The insurance policy is more detailed and sets out elements such as protection and exclusions.
The insurance certificate adopts the Acord format commonly used in North America, which lists the assured person, product, limit, additional assured persons, and other elements. The seller only needs to submit the insurance certificate to Amazon.