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What Insurance Do Online Businesses Need?

Aug 23, 2021

The COVID-19 pandemic has created a unique set of circumstances for many businesses. And with lockdowns and shutdowns of physical premises, many businesses have had to adjust strategy and set up an effective online presence to attract and engage customers.

Figures from Growth Intelligence suggest as many as 85,000 businesses launched online stores or joined online market places in the 4 months to July 2020. That’s a significant number of businesses who have either changed the way they operate or set up a totally new online business.

Such change offers both challenges and opportunities to business owners. And let’s not forget, when changing the way that your business operates you also open yourself up to a new set of risks to those which your business was previously exposed.

Here we look at some of the risks businesses with a new online presence may face and online retailer insurance considerations

New risks and challenges online businesses may face

Branding infringement

Having an online presence can increase your risk of brand infringement. From people using your brand name in their website domain name, to others using your brand name in paid for online adverts (for example Google AdWords), or infringement of your brand and trademarks through social media platforms.

The added issue with online brand infringement is that it can be difficult to identify exactly who is responsible for the infringement given the nature of the web in allowing anonymity.

Cyber crime

Any business which relies on IT systems or stores data is ultimately at risk of cybercrime. But if you have recently moved to an online presence, you may have increased you risks in this area. For example, you may now:

  • Take and process card payments online
  • Have a website that you rely on for your business success
  • Collect sensitive customer data through your website
  • Have a more complex IT infrastructure

It is important to recognise your move to ‘online’ and not continue to think of yourself as an ’offline’ business. Or equally as a business which is too small to attract the attention of a cyber attacker – SME’s are increasingly targeted by cyber criminals so businesses of all sizes are at risk.

Stock and distribution

Moving from physical premises to more of an online presence can see changes to the way you hold stock which can present different risks. For example, you may:

  • hold higher levels of stock
  • hold stock in alternative locations to your business premises
  • Use new distribution partners to deliver goods to your customers
  • have higher levels of returned stock

Reverse logistics

Setting up an online business and selling to people in this way can see some additional challenges present themselves such as dealing with product returns. The rise of online shopping and changes to consumer behaviour are thought to be behind higher return rates and the increasing importance of reverse logistics processes. How you deal with returns, create an efficient process which meets your customer expectations, and their consumer rights will also be a challenge you have to face when new to the online retail space.

Online retailer insurance needs and considerations

Some areas of insurance you may not have previously taken out but may now want to consider as you move into having an online presence include:

Intellectual Property insurance

Some of the challenges mentioned above when it comes to brand or trademark infringement when operating online can make it even more important to protect your intellectual property. For example, what would you do if someone else set up a website which has a near identical URL to your business offering the same product/service and taking web traffic from your business?

Intellectual property insurance is designed to provide indemnity for losses and costs incurred because of an intellectual property infringement. Intellectual property insurance can also be a deterrent to those who think that your business may not have the resources to pursue an infringement claim.

Cyber Insurance

Cybercrime is on the rise, we have seen cyber criminals exploit people’s worries about the COVID-19 pandemic as well as businesses who rapidly moved from office based to remote working set ups.

And as you move to having more of an online presence, cyber insurance should be at the forefront of your mind. Cyber liability insurance is an insurance product designed to offer protection for your business IT systems and networks – specifically damage to or loss of data. For example, if you suffer a date breach or a cyber hack or attack.

It will also be vital to take the necessary steps to minimise the risk of cyber-crime to your business.

Stock insurance

If your business is taking off since moving to having an online presence and you are holding more stock, you’ll need to check that your current insurance policies cover the increased value of your stock holdings. Likewise, if you move where you store your stock you will need to review this with your insurer and ensure that you will be covered.

You may also want to review other areas such as your third-party suppliers and distribution partners to ensure they have cover in place for your stock when it is being transported.

Public liability insurance

Public liability insurance will protect you and your business in the event of someone having an accident or getting hurt while they are on your premises. For example, if someone visits your warehouse and sustains an injury. Equally if you accidentally damage someone else’s property, your Public Liability insurance will protect you.

So, whilst you may have minimal interaction with customers when operating an online business, risks to the public still exist in other areas of your business such as you’re warehouse so it isn’t a cover you should overlook.

Insurance helps you recover from unforeseen events that impact your business financially, helping you get back on your feet so that you can continue to operate. So if you change the way that your business operates it is important to feed these changes back into the insurance decisions you make. At Anthony Jones we have teams of experts who can help understand your business, the risks you may face and help you make conscious buying decisions when it comes to your business insurance. Chat to us today on 020 8290 9080 or email us at business@anthonyjones.com.

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