Amazon DSP: Insurance Costs and Labor Shortage

Tips for Keeping Track of Your Business Expenses

Amazon Delivery Service Partners (DSPs) have many variables they need to keep track of. In this article, Interactive Accountants want to take some time to explain some of the struggles and issues that we have seen DSPs go through and offer some advice and ideas along the way. Some of the largest issues that DSPs have can be broken down into a few categories. The first and easily largest of the variables is the insurance cost. Between workers comp, vehicle ensuring, and driver insurance, these variables can become some of the most costly things an Amazon DSP will go through, aside from payroll.

Insurance Costs

When it comes to insurance costs, the daily issues that an Amazon DSP will face will generally fall into two categories. First, drivers must be authorized to drive the vehicles covered by insurance and depending on their state and driver, these rates may change. The second major category of insurance costs that Amazon delivery partners face is workers' compensation. Currently, the average rate our customers pay for workers' compensation under the parcel delivery class code is around $6.75 per $100 payroll. The average cost for a commercial liability package insurance policy is about $35,000 per year. Parcel delivery class codes do vary by state so it is important to note that these numbers are subject to changes across the US. These numbers come from the NCCI (National Council on Compensation Insurance), which is a national non profit responsible for regulating and setting guidelines for workers compensation.

Within the topic of workers comp, there are a few variables that Amazon delivery service partners have to keep track of besides average costs. Workers' compensation can be summed up in one simple word, claims! When dealing with insurance claims, the process involved regarding an Amazon delivery service can differ depending on the severity of the claim. Suppose an employee is injured while working in a vehicular accident or another way. In that case, the claim becomes much more involved because you have the possibility of having health and auto insurance tied in together. You also have to deal with the possibility of a potential lawsuit depending on if there was negligence present that caused the hypothetical injury. The main point is that when it comes to claims, it is an unfortunate truth that there is no way around. If you have an employee who filed a claim and does not follow through with it and see that it is handled, there could be consequences, like losing your insurance. Be vigilant here and follow up on injured employee claims and if an option, perhaps that employee can return to desk duty earlier than a route, which may help mitigate your claim

The other half of the broad topic that is workers' compensation in regards to Amazon delivery service partners are dividend plans, similar in concept to investment dividends, carriers offering dividends post-audit will share with policyholders and come to a conclusion based on predetermined qualifications. The key factors of dividend eligibility entail the timeliness of your monthly payroll reporting, especially when your eligibility will not exceed the last one to two payments if they are late. Regarding dividends, the key is timeliness and getting things done, meeting the deadlines before them, and being prepared. In a business such as an Amazon DSP, where you're dealing with people, vehicles, one of the largest companies this world has ever seen, and your private sector business, everything needs to be above board. Beyond that being said, this in no way, shape or form means that Amazon DSPs are doomed to fail or will face more hardship than other businesses. All it simply means is to thrive as an Amazon delivery service partner, you need to adopt a different strategy. Here at Interactive Accountants, we can help you do that.

Loss Control

Mitigation of poor loss experience is arguably the most common profitability killer of DSPs. A good insurance agent will have a high focus on loss control on an ongoing basis with your DSPs. When it comes to loss control, the biggest vocabulary word you'll need to know is loss ratio. All loss ratio is a percentage calculated by dividing incurred losses by total audited premium, where zero losses would maximize your dividend to the highest amount possible per the carrier's dividend criteria. The maximum loss ratio threshold for qualification to some extent of a dividend varies based on state and the claims filed. The attractiveness of dividend plans is that they allow the return of insurance premium potential for those who accrue favorable loss experience. What we mean by this is when a loss occurs in a business, it can either turn into a claim that will gain money through compensation or the less official variable of learning from your mistakes. We like to emphasize here in interactive accountants that while we focus on helping businesses, we understand that the human variable is the most important regardless of the situation.

If you are an Amazon DSP Owner, you need a CPA firm that truly understands what you're working with, and that firm is Interactive Accountants, helping businesses grow and succeed financially is our number one goal. We are here to help! If you're still not convinced yet to give us a call, feel free to look at our other blogs regarding the help we offer various businesses and offices.

If you are a professional in any field that these tips apply to, schedule a free consultation here with our owner Matthew Shiebler, CPA. He's been practicing accounting for over 25 years now and is a business owner, just like you!