Overview of the On-Demand Food Delivery Industry
Food delivery has transformed into one of the most competitive industries with the likes of start-ups, restaurants, and grocers all vying for a piece of the pie. In less than 5 years the percentage of online food delivery orders has doubled (Gloria Food). Those who succeed in the space will need to solve the complex challenge of how to insure themselves when rushing food to a demanding customer base.
Part of the task is speed: 44% of people are likely to order food for delivery more often if restaurants could offer them faster delivery times (Gloria Food). The blueprint for success in food delivery involves deciding whether to own or outsource the fleet of delivery vehicles and which mode of transport to use (i.e. car, bike, scooter).
Other considerations include, how will each delivery be tracked and what procedures will be used to screen the food couriers. This is some of the key information that will be required from underwriters to develop a scalable insurance policy. See below for more on applicable insurance coverages and recommendations for On-Demand Food delivery companies.
What Insurance do On-Demand Food Delivery companies need?
What it covers:
General liability is intended to provide coverage for 3rd party bodily injury or property damage caused by your operations. The policy is intended to not only pay for restitution to the injury or property damage, but will also pay for the costs of litigation as well.
Our General Liability policies can address the following 3 claim scenarios:
- A customer becomes violently ill because of the food
- An altercation between the food courier and customer results in injury
- A courier transporting by bike injures a pedestrian
Commercial Auto / HNOA
What it covers:
Auto liability insurance, both commercial and hired and nonowned, are intended to fill a gap in your general liability insurance. Like a GL policy, the auto liability policy is intended to provide coverage for 3rd party bodily injury or property damage as a result of your operations specifically tied to the use of automobiles. GL policies specifically exclude these sorts of claims, which create the need for this separate insurance product.
Our Commercial Auto and HNOA policies cover:
- Liability Coverage: Paying for damage a courier may cause to another vehicle
- Medical Payments: The cost of medical payments to the driver, regardless of fault
What it covers:
Cyber insurance is designed to protect companies against lawsuits from third parties and fines and penalties from regulators. The goal of these policies is to address the risk exposure created by various electronic activities, the most common of which being the collecting or storing some kind of PII (personal identifiable information).
Why you need it?:
If you rely on an app for customers to utilize your scooters/bikes, Cyber insurance is a must. Each individual who joins your app is considered one record of PII and if that information is to be compromised, you could be on the hook for large financial damages. PII ranges from name and address to the credit card they use to upload credit to the app, and even if this information is hosted by a third party cloud provider, should it be compromised you could be on the hook.
What Underwriters take into account
Providing accurate and well thought out projections for your business will only promote carrier’s interest in writing your risk. Things such as revenue, miles driven and duration of time in between drop-offs will be critical during the underwriting process. Take it a step further by breaking these projections by territory (i.e. city or state).
Understanding what is the most cost effective rating method for your insurance policy may end up saving you thousands of dollars. HNOA policies are typically rated off of either sales (revenue) or volume of driving (miles driven). Use your insurance broker as a resource to learn which rating basis will be best for your specific business.
The most important process to have in place when operating an on-demand business revolves around knowing who your drivers are. It is critical to collect MVR’s (Motor Vehicle Records), do thorough background checks, and collect their personal auto insurance policies. If you use these tools and hire qualified drivers, the road to getting the proper insurance policy in place becomes a lot easier.