Pay As You Sell (PAYS) Insurance is one of those ideas so simple you wonder why you didn’t think of it yourself. But, like so many similar innovations in digital commerce, it’s set to radically change how business is done.
Until now, retailers have had to purchase costly premiums for the whole year based on projected sales, leaving them out of pocket if revenue didn’t meet those expectations.
PAYS reverses this process, allowing eCommerce retailers to only pay insurance on the products they sell, tying premiums directly to revenue. If sales go up, so do the retailer’s premiums in line, but if sales drop or are seasonal, the retailer isn’t left on the hook for premium payments, which might be beyond their ability to pay.
The new model has clear benefits for small or new eCommerce businesses that are typically working on very tight margins and may not have a clear picture of their projected revenue. By taking the guesswork out of insurance premiums, they can radically reduce their risk, safe in the knowledge they will only be asked to pay insurance on products they have already made a profit on.
How Does PAYS Work?
Unlike the traditional brick-and-mortar retail model, eCommerce generates granular data in real-time on the products that a retailer is selling. This data has already been a huge boon to other industries, such as marketing, bringing down the cost of advertising to retailers and allowing them better access to customers.
ECommerce insurance specialist Spott plans to bring the same benefits to insurance, closely tailoring premiums to retailers’ individual needs – and just like the marketers, it does this by making good use of the granular data generated by eCommerce.
Until now, insurers have calculated their premiums by making the best guess of which products a retailer will sell, and how many units are likely to be sold in a given time. That model has meant that premiums lag behind real-world sales – if a retailer has a good year followed by a slow year, they will be left paying over the odds for insurance.
Yet eCommerce allows retailers to track their sales in real-time, making the old way of calculating premiums outmoded. Now, if an eCommerce retailer sells ten units of a product in January but only one in February, PAYS means they won’t be paying insurance in February based on January’s sales figures.
PAYS Introduces Seasonality to Insurance
This dynamism in insurance premiums is of particular benefit to seasonal sellers. E-commerce marketplaces such as Etsy and Amazon have given millions of people the opportunity to run small side-hustle businesses from their kitchen tables, many of which are seasonal, such as selling Christmas decorations or wedding flowers.
As current insurance plans are annual, small retailers such as these will often skip insurance entirely, unable to justify the cost of a policy during the down-season when their income is low or non-existent. Yet, in doing so, they run a considerable risk. Just one claim from a customer who was injured, or whose property was damaged in relation to one of their products, can leave them having to find thousands of dollars in compensation or legal fees.
PAYS eliminates this risk. No longer will small-scale retailers be forced to pay annual premiums on seasonal products. Rather, they’ll only pay insurance on the items they actually sell when they sell them, allowing the costs of doing business to ebb and flow along with the business itself.
In the last couple of decades, eCommerce has opened up retail to millions of small business owners who otherwise would not be able to afford to run an enterprise of their own. PAYS helps fuel this trend even further, by eliminating the risks that go along with running a small seasonal enterprise.
Pays Is Set To Be a Game Changer for Ecommerce
But the benefits aren’t limited to seasonal sellers. PAYS is set to be a complete game changer for the eCommerce industry as a whole. The benefits that make the model so attractive to seasonal home-enterprise eCommerce retailers scale up to eCommerce retailers in general.
The eCommerce revolution has been wildly successful precisely because it does offer flexibility and responsiveness, helping to reduce the costs of doing business, increase opportunities, and maximize returns. So far, the insurance industry has failed to move with the times. Until now.
PAYS rockets insurance into the 21st century, finally delivering premium plans that are as responsive as the marketplaces and platforms eCommerce users are accustomed to using every day. And the benefits don’t stop there. Just as with other aspects of the digital commerce revolution, PAYS drives down the cost of insurance while eliminating the risk of overpaying for premiums, further opening up the market to a new generation of digital retailers. It doesn’t get much more win-win than that.
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