In order to adapt to the situation caused by Covid-19 pandemic, enterprises have seen a surge in e-commerce activities. Despite many outstanding advantages like reducing the cost of setting up and maintaining a traditional store, convenience in displaying products, and approaching customers easily, e-commerce still has certain risks that enterprises should be aware of. To understand these risks and the corresponding insurance needs, please refer to the article below.

1. Responsibilities of the employer

In their relationship with employees, a common risk that employers might encounter is damage to the health of employees while working for the enterprise. For example, if the enterprise is renting a warehouse to store goods, it will be liable if an employee is injured while working at the warehouse. It is due to this risk that enterprises need employer liability insurance as a necessary safeguard.

2. Responsibility for product quality

Products traded by enterprises can be extremely diverse in terms of their types, properties, and purposes. However, as goods’ production involves a variety of sources, it is very difficult for e-commerce enterprises to control the quality of goods. If a customer encounters an issue by using products purchased online from the enterprise, risks associated with such issues might lead to compensation or disputes. In order to mitigate the damage, some e-commerce enterprises have sought “insurance” as a means of protection against the risk associated with product quality.

3. Responsibility for information security in cyberspace

Enterprises conducting e-commerce activities always face risks related to customer information security. Since enterprises store a large database of customer information which is confidential and legally protected, they are likely to face risks caused by illegal access and exploitation of such information. Cyber information security liability insurance protects enterprises against database intrusions, thereby reducing the risk of legal disputes and financial losses.

4. Responsibility for delivery and logistics

The development of e-commerce leads to parallel development of logistics business. Transportation and delivery of goods in e-commerce is usually performed by logistics enterprises. Therefore, delivery liability insurance reduces risks for enterprises that may arise in the process of transportation from the warehouse to consumers. This is a potentially risky process that could lead to disputes between enterprises and their customers.

5. Payment fraud

Enterprises also face risks due to payment fraud. In the digital environment, acts aimed at payment fraud occur in a sophisticated and complex manner compared to traditional forms of commerce.

The biggest threat is the risk of illegal access and exploitation of credit cards or information given for online transactions on electronic devices. The consequences of such acts can be illegal usage of users’ card information which was tampered with without their awareness. This makes it difficult for enterprises to help competent authorities identify the perpetrators. Moreover, this might also affect the operation of the enterprise leading to reduced profits. To handle the increasing volume of online payment transactions, payment fraud insurance protects enterprises from transaction fraud and unwanted financial losses.

When one or more of the above-mentioned risks occur at the same time, there could be serious damage to the enterprise’s reputation. It also wastes time and resources to restore normal operations. Therefore, developing targeted mechanisms to promptly respond to risks and obtaining necessary insurance solutions limits the impact of risks and plays an important role in enterprises’ participation in e-commerce business activities.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.