Pay As You Sell (PAYS) insurance represents a revolution in the way liability insurance is offered to eCommerce businesses, but as a new product, it’s fair to say that its benefits are not yet well understood.
If you’re scratching your head and trying to work out what Pay As You Sell is, well, the name is pretty spot on. Conceived by the eCommerce insurance brand Spott, PAYS allows eCommerce retailers to match their insurance premiums to their revenue on a rolling basis; if your revenue goes down, so do your premiums. That means you’re only paying for the coverage you actually need, not a projection of how much you might need over the year.
If you run an eCommerce business that sells consumables (like cosmetics), and are currently paying fixed insurance premiums, let’s take a dive into five ways PAYS could benefit you.
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PAYS is data driven
As an eCommerce seller, you’re already aware of the huge leaps forward that going digital has had on the retail landscape. After all, without those digital innovations, your shop wouldn’t exist!
The granular data that digital retail offers has already radically changed marketing, making it much more affordable for small businesses to reach the niche audiences they need to thrive. And now that granular data is working its magic on the insurance industry.
Your insurance premiums are primarily calculated on the basis of two factors: how much risk of harm to person or property a product carries, and how many units of that product you sell (known as ‘exposure’). It stands to reason that selling thousands of candles is more likely to lead to an insurance claim than selling a dozen knitted soft toys.
Historically, insurers have looked at a retailers’ past sales to make an educated guess about what they are likely to sell in the future, then calculated risk and exposure on that basis. This makes calculating insurance premiums a guessing game. Granular data takes the guess-work out of the game.
PAYS is dynamic and responsive
With the guess-work eliminated, insurance premiums can be much more accurately calculated - in real time. Consequently, PAYS is far more dynamic and responsive to your needs as an eCommerce seller than standard insurance.
As you know, typical insurance premiums are fixed for at least a year. No matter how much or little revenue you make month to month, the same fixed premium applies, or may even have been taken upfront at the beginning of the year, leaving you banking on reaching your forecast revenue.
PAYS upends that standard model. You only pay for the coverage you actually need on a month by month basis, making it fully responsive to your personalized revenue stream. Should your revenue drop for any reason, so will your premiums. And while they will rise the more you sell, they will never go above the standard fixed price.
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PAYS is low risk - if you don’t sell, you don’t pay
This dynamism takes the risk out of accepting an insurance quote. In times gone by, when you agreed to a yearly premium you were taking a gamble, betting that your revenues would continue in line with your company’s historical revenues.
The outcome was that eCommerce businesses found it difficult to experiment with new product lines or seasonal products. If the new product was a success then all was well. If it didn’t perform as expected, those eCommerce businesses were still on the hook for premiums for the rest of the year, for a product they weren’t making any revenue on.
WIth PAYS, you only pay insurance on the products you actually sell. Or, put another way, if a product doesn’t generate revenue, you are not paying to insure it as though it has.
PAYS is more affordable
It stands to reason that if you’re paying insurance only on products that actually generate revenue, not on potential revenue, your premiums will be cheaper. And as we’ve said before, if things go well and your revenue does rise, your premiums will never rise above the bar set by standard premiums, giving you a clear win-win.
By pegging premiums to performance PAYS takes the stress out of financial planning, leaving you fully confident that your premiums will never exceed your ability to pay them.
PAYS is perfect for eCommerce
As a data-driven, dynamically responsive insurance solution, PAYS is ideal for eCommerce businesses of all sizes. Better yet, eCommerce sellers are in a unique position to take advantage of the benefits offered by PAYS.
The success of eCommerce as a retail model is down to the flexibility it offers. Never before have retailers been able to be as nimble with their product offerings as in the age of online retail. The roaring success of marketplaces such as Amazon and Etsy have proven the public’s appetite for products from independent sellers, taking a chance on new designs. Never before has it been so easy for sellers to set up seasonal stores, or to fit a retail business around other commitments such as family.
But the reality is that eCommerce’s dynamism has not been met by the insurance industry, which is far more used to predictability in both products and revenue. Until now. PAYS offers the dynamism that eCommerce retailers need. By utilizing the unique qualities of a retail model that generates data in real time, PAYS matches the speed of eCommerce retail to offer a tailor made insurance solution.
Put simply, the digital revolution in insurance is finally here.
