Introduction to the Show and Guest

Hello, I’m your host John Caendish and welcome to season five of the Amazon Strateer Show. The show that’s all strategy with no hacks, no silver bullets, and no magic pills. Just real practical strategies to grow your Amazon business. Today I’m joined by none other than my friend and business partner Rohit N. from Ashawfall. Insurance may not be the most exciting topic ever, but it’s one thing that has saved you money. We’re talking about strategy here because at the end of the day, we can either make more money by growing or by getting better at operations. That gap between operational costs and growth is where all the profit lies. Last week we were talking about AI and AI optimization and growing your business without your team. Today we’re talking about insurance, and I just want to bring more and more ways for you to make more money in this market where actually some businesses aren’t growing because they’ve hit saturation.

Rohit is the founder of Ashawfall, an AI-native insurance underwriter built for e-commerce businesses. Ashawfall provides pay-as-you-sell product liability insurance using real-time sales data and category-level risk intelligence to underwrite more accurately than traditional models, which at the end of the day means premiums that are highly competitive and coverage that actually covers you if you have a problem. Rohit also has deep experience at the intersection of e-commerce and insurance, and before Ashawfall he scaled five brands from 50k to 35 million in annual sales in 5 years, which is impressive. So Rohit, welcome to the show.

(Full disclosure: this article discusses a company founded by the host’s business partner, and it may include affiliate or sponsored links.)

Thanks for having me, John.

You are very welcome. So insurance, my favorite topic. Why should we even bother with insurance right here?

Why Insurance Matters for Amazon Sellers

Insurance Is Mandatory

Well, there are a couple of things to think about here. Number one, it’s mandatory. The marketplaces require it. It’s not just that you have to have it because you should have it, which you should, but more importantly the marketplaces or retailers require it, and especially Amazon. We have seen a lot of instances of sellers getting suspended for the lack of insurance. Amazon can come in and sweep up sellers if they get a claim in a certain category. To be honest, you should have insurance anyway. It’s the right thing to do as a business owner.

Yeah, I’d agree with that. On top of that, I’ve had insurance for a decade. I’ve never used it, which I guess is a good thing. But you were telling me before, insurance usage is quite high. What percentage, when you’re quoting on insurance, do you actually expect will claim at some point in the life of their policy or the life of their business?

Insurance Usage and Loss Ratios

So think of it this way, in the US the average net loss ratio for an insurance company is reportedly around 114%. What does that mean in practice? That means that for every $100 the insurer collects, they pay out $114. Especially with this product, which is product liability insurance. Now you might ask, well if they’re losing money on every $100 why do they do it? Well, they do it because very often it’s what’s known as a loss leader. You make a loss on it, but then secondarily it’s not just your underwriting profit, you also invest that money in the markets and make a return on it, and that’s how you make 1 to 2% as a tiny profit on the back end, but you are expecting to pay out everything that you collect in premiums.

I mean, personally, I’m very glad that I’m not an insurer and that you are. But insurance types, you said private, product liability, what are the types of insurance that sellers should be thinking about? What do they need? What’s optional? Can you take us through?

Types of Insurance for E-commerce Sellers

Underwriting Explaine

Sure. A lot of sellers, when they deal with a broker, for example, and there’s lots of brokers in the market. We’re not a broker, we underwrite the insurance. Underwriting means that we would decide on what risk we’re willing to take. We decide whether the product is insurable and at what price, that’s our decision. A broker would bring a business to us to make a decision on it. When we deal direct with customers, we just pass on the cost savings to the customer instead of them going through a broker and paying around 15% higher in premiums.

Business Owners Packaged Policy vs What Sellers Need

Coming back to what I was saying, when brokers bring businesses to the market and deal with our competitors, small businesses are typically sold what’s known as a business owners packaged policy, BOP, and that’s a bunch of things that most e-commerce businesses don’t need, all packaged into one. As an example, the vast majority of our customer base don’t have warehouses. They don’t hold inventory or have staff managing warehouses. They use 3PLs, FBA, WFS (Walmart’s version), and increasingly TikTok Shop’s own fulfillment service. When they don’t have their own warehouses, why are they paying for slips, trips, and falls in a warehouse they don’t have?

There are a lot of things that e-commerce businesses are sold that they don’t need and end up overpaying for. Case in point, when I was running my own Amazon businesses, we had a $10 million per-occurrence insurance policy. To be honest, at the time, I had no idea what I was looking at. The broker said, “This is what you need to have, and this is how much you need to pay,” which in my case was $100,000 for one of my businesses. We just paid it because we figured that’s what Amazon wanted. The reality is that Amazon typically only requires a million dollars, and Walmart requires $2 million.

Broker Commissions and Overpaying

Very often we see that brokers, and I need to caveat this by saying we partner with a lot of brokers so maybe I’m not being entirely fair to them, receive commissions based on how much you pay. We’re trying to sell insurance at the cheapest rate possible, and on average we’re about 42% cheaper than the rest of the market, which is a big gap. On top of that, we also do native monthly billing. We’re monthly billed and usage-based, so you can pay monthly without premium financing. Premium financing alone can add another 7 to 25% APR on top of your premiums. So we’re saving sellers a good amount of money when they switch to us.

Monthly Billing vs Annual Premium Financing

That’s awesome. So just to clarify, because a lot of people won’t understand that, insurance premium policies apart from yours are pretty much always sold as annual, and if you choose to pay monthly you’re actually just using a finance product, borrowing money at 7 to 25% over that year. So they jack it up.

That’s right, exactly. I know of one insurer who will sell an annual policy but allow you to pay monthly, but the finance is baked into the price. All insurance is typically sold on an annual basis. We sell an annual policy but with native monthly billing, which is entirely different from the rest of the market. I know it sounds similar but it’s not, it’s hugely different. With all insurance, you can’t buy coverage for an accident that’s already happened. Does that make sense? Otherwise everyone would just buy insurance after the fact. I’m in the hospital about to die and I buy life insurance. That doesn’t work.

Sales-Based Underwriting vs Projection-Based Underwriting

The Problem with Projections

What we do instead of looking at a forward projection of sales, which is what everyone else does, is different. They’ll ask, “What do you sell and how much of it are you going to sell in the next 12 months?” and then give you a quote based on that. The problem is that, as we know from being operators, your projection is almost never exactly right, and it could be off slightly or greatly. You could be overconfident and say you’re going to do 100 million in sales or 10 million in sales, then have a bad Prime Day, or run out of inventory, or hit shipping problems, and suddenly you’re not doing the volume you thought you’d do, but you’ve already paid for insurance based on that projection and you’re not getting a refund if you don’t hit those numbers.

Or you could be underconfident and project a million but end up doing two. In that case, it’s even worse, because anything above your projection is uninsured, which means any claim from that gap is uninsured.

Premium Audits

On top of that, if the insurer thinks you’ve underdeclared your revenue, and you can check this in your own policy, there’s a clause called a premium audit where the insurer can charge you $25,000 to send in an accounting firm to check whether you’ve underreported your revenue. So with all of these things, it’s a broken system across the industry.

Real Sales-Based Pricing

What we’re doing instead is looking at your actual sales, your real sales from the last month. This could be your Prime Day sales or an offseason sale, and then we rate and price your policy based on that data.