Recently, Amazon has modified the terms of use of its A-to-Z Guarantee, the insurance product that protects purchases of items sold and shipped by third-party sellers. This guarantee applies in cases of delivery delays and issues with the condition of purchased items or returns.
As informed to platform customers, thanks to the guarantee, a buyer who encounters a problem only needs to report it to Amazon. An in-house department will verify within a few days if the order is eligible for a refund.
However, this is only a small part of the complex insurance coverage mechanism present on Amazon. In fact, the marketplace has chosen to intervene by adding a clause that sellers should not underestimate…
What has changed in the A-to-Z Guarantee?
In this regard, Amazon has announced that it has modified the policy terms by requiring sellers to obtain specific liability insurance coverage to cover any potential damage to property and persons that the sold products may cause.
This is, therefore, quite advanced coverage, which will intervene in case of damages exceeding 1,000 euros. Below this amount, the marketplace will continue to cover the compensation without requesting anything from the seller or the insurance company (if the sellers have a valid policy).
The insurance requirement
The new insurance coverage, let’s clarify immediately, is mandatory. Sellers without this coverage risk particularly severe negative consequences, which at best translate to limitations in selling in specific categories, and at worst or in cases of recurrence, directly to the suspension of the sales account.
Moreover, in the absence of valid insurance, the seller will be obliged to fully reimburse the amount that the platform grants the customer as compensation for the damage suffered.
As usual, therefore, Amazon seems to have primarily considered the buyer. The marketplace buyer will not be affected by any disputes between Amazon and the seller. Initially, it will always be the marketplace that compensates for the damage. The platform will then seek reimbursement—if applicable—from the seller or the insurance company.
How Claims Management Changes
But how will claims be managed after the introduction of the requirement? Let’s try to summarize some of the main cases:
- The customer can file a claim with the seller or with Amazon. In the first case, the seller can try to resolve the claim independently. In the second case, Amazon will activate the A-to-Z process, evaluating the validity of the claim together with the third-party seller.
- Amazon will collaborate with some partners to identify possible fraudulent or false claims during the review phase.
- For claims up to 1,000 euros, Amazon can resolve the case with the customer without requesting reimbursement from the seller. However, the seller must provide proof of insurance or manufacturer details. It is also necessary to authorize Amazon to handle the claim on their behalf.
- The seller must provide Amazon, within 7 days of notification, proof of insurance or manufacturer details. Otherwise, for claims up to 1,000 euros, they might be required to reimburse Amazon for any payments made to the customer. For claims over 1,000 euros, Amazon will contact the seller, the manufacturer, or the respective insurer for insurance coverage details. Then, the marketplace will work with the insurer and the customer to resolve the issue within 30 days.
Who needs to obtain liability insurance
So far, the new functioning of the A-to-Z Guarantee for sellers. However, it should be clarified that not all sellers are subject to this obligation. According to the new policy terms, the insurance contract will apply to those who:
- have a monthly turnover exceeding 5,000 euros;
- are private label owners.
Essentially, it implies that almost all sellers will be required to obtain insurance coverage. As for distributors, they (who are not private label owners) will be exempt from insurance coverage only if they provide all manufacturer information. Otherwise, they will be personally and directly responsible for compensation claims.
Characteristics of the liability insurance
Amazon has also specified the characteristics of the liability insurance. It must:
- cover all products the seller has in the catalogue;
- have a deductible not exceeding 10,000 euros;
- have a minimum insured capital of 500,000 euros.
The insurance must cover any damage to persons or property caused by the sold products. Therefore, commercial insurances covering other risks, such as loss of goods, are not relevant.
Now, it seems evident that finding an insurance product with these characteristics is not easy. It is likely, however, that the insurance market will gradually respond to these specific requests in the coming months.
In the meantime, Amazon itself acknowledges the possibility that the seller might not be able to obtain such coverage. In this scenario, the guarantee terms stipulate that the seller will be responsible for the reimbursement.
Here are some brief indications on the new guarantee required of sellers. To learn more about how buyers can activate the guarantee, we recommend this article on Amazon’s website.
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