The threats that fake shipment insurance poses to e-commerce sellers today

In the first quarter of last year alone, Americans spent an astonishing $252 billion online, and by the end of the year, e-commerce accounted for 16.7% of total retail revenues nationwide.1

Such figures have been rising inexorably, highlighting a situation that is unlikely to change any time soon, especially as large Chinese retailers – Temu, the latest to join the crowded market – look ready to expand into the US.2

However, there is a darker side to the ease and convenience of online shopping that is becoming more and more apparent to many consumers. In 2022, approximately 260 million parcels were stolen at the point of delivery, which is the so-called porch piracy.3

For retailers, the loss amounted to approximately $20 billion in lost products. Whether they are responsible for it or not, porch piracy is a problem that takes a toll on the retailer because many customers do not know the difference between the seller and the delivery company. This can significantly impact a brand’s overall customer experience, leading to a number of adverse effects on retailers’ operating costs: customer service, inventory, logistics and marketing.

Millions of customers affected directly or indirectly are increasingly opting for shipping insurance at checkout to cover their shipments, with many paying extra for what they hope will cover them in the event of theft or damage.

However, consumers and retailers need to realize that many of the ‘shipment protection’ solutions being offered may come from unscrupulous operators attracted by what they perceive to be lucrative opportunities. In the case of false assurances, when something goes missing, both sellers and buyers are left to face emerging problems, with no hope of compensation.

Oklahoma and Utah have issued written guidance confirming that legal bundled coverage offers must include the involvement of a licensed insurance producer. The need to include a licensed insurance producer is not unique to Oklahoma and Utah. All state DOIs provide access to state databases identifying such licensed producers.

As online retailing grows in size and value, the need for package and delivery protection will increase. Illegal package security services pose a risk to individual retailers and the entire e-commerce industry. Illegal scam offers can ruin companies’ reputations and eat into already thin profit margins, reducing revenue from repeat business and creating public relations nightmares for retailers.

Companies have an obligation to choose an insurance service with due care. A true shipping and delivery insurer follows the complex rules and regulations of many states’ insurance markets, acting as the face of the retailer when an order goes missing.

A legal option like the one offered by Route is the key to solving the growing problem of fake package insurance. This gives retailers and customers confidence that missing items will be easily replaced as part of an overall service that delivers class-leading after-sale customer service.

Customers who purchase from retailers using Route benefit from real-time delivery tracking and delivery options that improve the shopping experience – enabling smaller businesses to compete with the customer service expectations consumers currently have from giants like Amazon.

To put the impact of using Route into perspective, Solo Stove – a popular fire pit company – experienced significant customer service issues when trying to ship large, easily damaged metal fire pits. Since implementing the Route platform, the company has saved thousands of dollars in insurance premium costs, reduced claims customer support tasks by 92%, and increased shopper satisfaction rates by 10%.

Route ensures deliveries and its tracking capabilities also allow customers to minimize the time packages are left unattended, reducing the risk of theft. Tracked and insured deliveries may also be eligible for carbon offsetting, as we have written about more details in this article(ed. please link to the previous article). By using Route, companies can be sure that their brand is synonymous with reliability, safety, AND sustainable development.

Book a Route demo to eliminate the risk of fraudulent shipping insurance, improve your brand identity and customer experience, and reduce costs in many areas of your retail business.

1 https://capitaloneshopping.com/research/online-shopping-statistics

2 https://www.businessinsider.com/temu-opens-its-marketplace-to-us-based-sellers-2024-3

3 https://www.cnbc.com/2022/12/18/porch-pirates-stole-an-estimated-260-million-packages-in-2021.html