Self Insuring

[Archive]

Posted By: gdporter

Unfortunately, I think that many of the responses to this question are missing the point. All Sellers self-insure - or to put it another way, any reputable Seller recognizes that he/she needs to refund the purchase price to the Buyer if the product is never received by the Buyer or to compensate the Buyer if the product is damaged in transit. That is built into the purchase price and is, for better or worse, part of the risk of doing business by mail.

The Seller can mitigate these risks by selecting the manner of shipment and the manner of packaging - and passing these costs on to the Buyer (oftentimes with an undisclosed profit margin built in). For that matter, the Seller can specify that insurance is required (at the Buyer's expense) and that the sole rights of the Buyer are against the insurance company. It is, of course, also possible for the Seller to specify that he/she will not be responsible for lost packages or goods that are damaged in transit without insurance, but I for one would never deal with such a Seller unless the package was fully insured -- and in that case the Seller should insist on insurance anyways, since the disclaimer will have little practical effect unless the Seller can PROVE that he/she did mail the package correctly and that the goods were packaged in a responsible manner..

The point of purchasing insurance is the perceived security that an independent, financially-capable third-party will be present to resolve shipment disputes and make payments. We can debate whether insurance companies perform this meritorious service (I define insurance to my clients as "the business of accepting premiums for the privilege of denying coverage"), but that is not really the point. Insurance is not necessary when dealing with a reputable Seller, but is often purchased because the Seller is not known to the Buyer, or because of the perception that there will be a "fairer" hearing if the claim is pursued with an independent company, or because the Buyer believes that insured packages are handled with greater care by the carrier.

It is common practice for Sellers to "charge" for self-insurance, either by building that into the sales price or by building an additional cushion into the shipping price. (How often does this site have discussions about a Seller's shipping price being too high?) However, I think it is flatly wrong for a Seller to charge for insurance when none is purchased. There would, of course, be a different answer if - as is often the case for large companies - the Seller has purchased a master policy and makes that available to each Buyer for them to submit claims directly.

Ah well. So much for my efforts to make friends at this board. . . . . . . .