Discover how the combination of MCSS and shipping insurance is the ultimate strategy for success

Imagine this: you’re walking across a tightrope when the wind starts to pick up. You begin to wobble and before you know it, you’ve lost your balance and are plunging into the unknown. Not to worry – you’ve prepared for this with a safety net. While every situation may not be this life or death, a safety net is key for ensuring that even when you wobble and lose your balance, you have a reliable support system to catch you.

Shipping insurance, the logistics version of a safety net, is coverage meant to protect you from financial losses that can come with the shipment of goods. There are several risks and potential losses that can occur during the transportation of goods that shipping insurance can cover based on their terms such as damage, lost packages, customs issues, and natural disasters.

However, there is one threat that’s become increasingly prominent when it comes to financial loss from package deliveries – package theft. In 2022, 1 out of every 100 package deliveries were stolen, totaling 260 million. Furthermore, 17% of Americans have had a package stolen in just the past 3 months and package thieves have poached over $8 billion in merchandise over the past year.

Sound alarming? We agree. Let’s dive into how we can mitigate these risks with shipping insurance.

Before we tackle the details of shipping insurance and carrier offerings, it’s crucial to differentiate between the two. While carriers typically include a basic level of liability coverage, their offerings may have more limitations.

Shipping Insurance

Starting with the foundation, InsureShield by UPS Capital states shipping insurance refers to “coverage for packages that are lost, damaged or stolen by porch pirates”. Shipping insurance acts as a safety net for shipped goods while in transit with carriers. It applies to various types of shipments, such as parcel, LTL (less-than-truckload), FTL (full-truckload), air, ocean, intermodal, and GIG shipments. Arguably the most important aspect of shipping insurance lies in its ability to offer comprehensive reimbursement, enabling customers to recover the full value of their shipment. In some cases, this coverage can also compensate for expedited shipping costs, offering an additional layer of protection for shippers.

The pricing model for shipping insurance is simple, normally based on a per $100 of the order value. Shippers agree on a negotiated rate the customer pays for every $100 of the shipment’s value. For example, if Sarah chooses a rate of $1 per $100 of value, insuring her $400 shipment would incur a $4 insurance cost.

The process for filing a claim with shipping insurance aligns with the process of most other insurances. If something were to happen to Sarah’s shipment, she can submit a claim for the issue that arises. From there, she will go through the reimbursement process after verifying the loss or damage to her shipment. This proactive approach to risk mitigation ensures that both businesses and individuals like Sarah can enjoy a smoother shipping experience.

Carrier Offerings

Different from shipping insurance, carriers do offer shipment protection called Declared Value. Although it resembles insurance from a cost standpoint, it may not offer the comprehensive coverage that shippers might be looking for. FedEx explains the declared value of a package as the “maximum liability in connection with the shipment of that package, including, but not limited to, any loss, damage, delay, or misdelivery relating to that shipment”. It is important to note that the sender is accountable for proving any actual damage to the package. The person shipping the package also takes on the risk and responsibility for any losses beyond the value declared.

Carrier Offerings Risks and Limitations

When using declared value through your carrier offerings, getting reimbursed for a claim can be more difficult than it may seem. To be eligible, you must be able to prove the carrier is responsible for the claim, not just the fact that damage or theft has occurred. If the carrier is successfully proven to be at fault, carriers will only reimburse the cost for repairs, the depreciated cost of the shipment, or a replacement cost. To make this process even more complex, it can take several months or up to a year to receive reimbursement, leaving whomever financially accountable until well after the loss has happened. This prolonged resolution adds an additional layer of complexity and financial burden for shippers who choose to rely on carrier offerings over shipping insurance.

Not everyone may want or need shipping insurance, but it can be a strategic asset that can make all the difference in protecting your shipments. That is why it’s important to understand certain scenarios and characteristics of your business that may prove it essential. Let’s look at some situations when shipping insurance should be considered.

High-Value Items

If your business deals with high-value items, utilizing shipping insurance becomes crucial. The coverage is a protective shield against potential losses or damages that may occur during transit, causing a massive financial fatality. Shipments like limited edition or rare items are the perfect candidate for shipping insurance, given their higher perceived value and difficulty to replace.

Fragile of Easily Damaged Goods

Shipping insurance is a great choice for fragile or easily damaged goods. They are especially susceptible to mishandling during their transit, and shipping insurance provides coverage for any potential damages incurred on their way to the customer.

Risk Appetite

Risk appetite is the amount and type of risk an organization is willing to take on in order to meet their strategic objectives. When looking into shipping insurance, consider your company’s risk appetite. If your business is risk-averse, the threat of potential loss or damage may sway you towards shipping insurance. It offers an additional layer of security, ensuring that your investments are protected if something goes wrong.

High Urban Delivery Concentration

The risk of package piracy, or package theft, significantly increases in urban areas. Businesses located in urban areas with a high volume of deliveries should consider shipping insurance. It becomes a strategic choice in these kinds of scenarios, offering financial protection against thieves in large, populated cities. In fact, in 2023, 42% of package theft victims lived in urban areas. By aligning your shipping strategy with the risk associated in your delivery locations, you can make better choices in protecting your products and your customers’ satisfaction.

The customer experience holds more power today than it ever has before. It stands as a pivotal factor influencing brand perception, customer loyalty, customer retention, and so much more. Shipping insurance can be a beneficial tool in increasing the customer experience your business provides, especially when unforeseen challenges arise. This can ultimately increase your Net Promoter Score (NPS Score), a market research score used to measure customer loyalty. There is a clear, positive relationship between customer satisfaction and business growth. In fact, a study by the London School of Economics found a 7% increase in NPS correlates to a 1% increase in overall revenue.

Shipping insurance plays a significant role in maintaining customer satisfaction, especially if something goes wrong with a delivery. For example, failed deliveries can push customers to explore alternatives, leading them right into the hands of a competitor who can offer more reliable services. Not only do failed deliveries cause the immediate loss of a sale, but they damage customer trust and loyalty, diminishing the potential for a returning customer. Even if the shipping related issue was the carrier’s fault and not the fault of the company, it is often still reflected on the company and the impact on customer perceptions can have a lasting impact. In fact, 85% of online shoppers won’t reorder from an online retailer after just one bad delivery experience. Overall, shipping insurance is an important strategy to consider in not only protecting your business financially but protecting your customer relationships as well. [Is your current parcel shipping strategy costing you customers and sales?]

Once you’ve decided shipping insurance may be the right choice for you, the next step is to shift your focus to the selection of a shipping insurance provider. Certain considerations and key features, like technology and multi-modal carriers, can play a crucial role in optimizing your shipping strategy.

Technology First

When evaluating shipping insurance providers, look for those who leverage and prioritize technology. Specifically, examine how providers incorporate technology, particularly through APIs, to provide insurance rates and simplify the claims process. Top-tier providers offer robust and adaptable shipping insurance APIs that seamlessly integrate with all aspects of your ESS, especially with your Order Management System where incoming orders are handled. Taking a deep look at the provider’s use of technology for automating claims processing is very important as, if efficient, can result in a significant decrease in the time it takes to resolve open issues.

Multi-Modal and Carrier Agnostic

A leading shipping insurance provider should offer solutions that enable companies to insure shipments across all carriers and shipment types. Flexibility is crucial for companies as the supply chain and logistics industries move fluidly, so they should look for a provider who isn’t tethered to a single carrier. This multi-modal and carrier agnostic approach will allow businesses the freedom to continue to adapt and optimize their shipping strategies.

Looking for a top-notch Shipping Insurance Provider? ProShip has connections to some of the leading providers in the supply chain industry. Contact our team for an introduction!

The next step in adapting and optimizing shipping strategies is combining shipping insurance with multi-carrier shipping software (MCSS). Because MCSS can be seamlessly integrated with your Enterprise Software Stack (ESS), it serves as a centralized platform designed to streamline and optimize the complexities of the shipping process across several carriers. This integration is unmatched in providing enhanced efficiency, improved accuracy, minimal errors, as well as data and insight throughout the entire shipping lifecycle.

Navigating the complex world of shipping requires more than reliable carriers; it demands utilizing strategies that can protect businesses from potential consequences. Not only is shipping insurance important for protecting the financial status of our businesses, but it also adds a protective layer to the element of customer experience.

The combination of multi-carrier shipping software and shipping insurance creates an unmatched powerful solution. This integration not only optimizes your shipping operations but also protects businesses against the harmful impacts of uncertainties, creating the ultimate strategy for shippers.

Leading solutions like ProShip’s robust multi-carrier shipping software offer a streamlined, versionless experience that grows with your business, standing as a reliable asset at all stages. This versionless approach keeps pace with your business’ needs to meet the ever-evolving shipping landscape and doesn’t require expensive, frequent, or forced upgrades. ProShip’s advanced solution ensures that businesses remain equipped with the latest features, functions, and optimizations to promote a continuous improvement cycle of growth, not only boosting operational efficiency but also positioning businesses for long-term success.

As a software solution dedicated to providing customer-centric excellence, partnering with ProShip and shipping insurance promises enhance security, efficiency, and an overall elevated customer experience.
Want to learn more about how the combination of MCSS and shipping insurance is a game-changer in turning shipping into a strategic advantage? Contact our team of shipping experts or schedule a demo to discover how our top-tier solution can be your safety net when you fall.

About the Author

Will Hennessy is an Enterprise Sales Executive for ProShip Multi-Carrier Shipping Software, where he assists shippers with solving their complex parcel shipping problems. Prior to ProShip, Will held various roles at UPS Capital. Will lives in Smyrna, Georgia with his wife and daughter.