In a bid to protect customers and sellers, Amazon on Tuesday stated that beginning Sept. 1, the company will pay personal injury or property damage claims of up to $1,000 for defective products sold through its website, according to a company blog post.
The company is also launching Amazon Insurance Accelerator, a network of vetted insurance providers who will offer liability insurance to qualifying sellers.
The efforts are an expansion of the company's "A-to-z Guarantee," which it introduced 20 years ago.
Amazon thinks it is "rare" and "unlikely" that a defective product sold through its website would cause personal injury or property damage. But, if it does, the company is prepared to compensate shoppers with no cost to sellers "who abide by our policies and hold valid insurance."
Starting this fall, the company will facilitate the resolution of claims between the customer, the seller and their insurance providers. Once a customer files a claim, Amazon will then "combine our advanced fraud and abuse detection systems with external, independent insurance fraud experts to analyze the claim." The company will present credible claims to the seller and will deny those that are deemed unsubstantiated. Amazon said that the process will save its merchants from having to investigate claims on their own.
Over 80% of claims are for under $1,000, according to Amazon. The e-commerce giant will step in to pay higher amounts if a seller "is unresponsive or rejects a claim we believe to be valid."
Amazon wants to make the insurance component more streamlined, too. Sellers must have liability insurance, but the company created the Amazon Insurance Accelerator to provide competitive rates to its sellers. Merchants are not required to use the accelerator, though, and can instead continue to obtain insurance from the provider of their choice.
Third-party marketplace sellers are a vital component of Amazon's overall e-commerce strategy. In its latest earnings, marketplace growth outpaced the company's own retail sales growth, according to CFO Brian Olsavsky, with revenues from services for its marketplace sellers up 38% to over $25 billion. According to Marketplace Pulse, third-party sellers accounted for an estimated $295 billion worth of products sold over Amazon's site in 2020, a 47% year-over-year increase.
Amazon has pursued several methods to enhance trust in its marketplace. In 2019, the company launched Project Zero, which uses machine learning to detect and remove suspected fake goods. Last year, it launched its Counterfeit Crimes Unit, composed of former federal prosecutors, investigators and data analysts, with the goal of completely eliminating the sale of fake goods on its site. The company has also partnered with a number of businesses to pursue fraudulent merchants - as recently as Monday, Amazon and GoPro filed a joint lawsuit against counterfeiters.