Amazon’s Business Model Is Wreaking Havoc Across the Insurance Industry
Amazon hit their highest selling numbers ever during this year’s Cyber Monday sales.
Between Thanksgiving and Monday, December 2, the company reached a mighty, yet vague, quota of “hundreds of millions” of packages.
In its nearly two-and-a-half decades of operation, the e-commerce conglomerate has never seen a day with higher numbers.
Yet while Prime lovers and online shoppers around the world are happy with the quick delivery and low prices of their holiday gifts, insurers are grappling with the behind-the-scenes operations that could cause major liabilities.
Known for its groundbreaking same-day, 24-hour and two-day delivery, Amazon could make none of that possible without backbreaking assembly lines and an exhaustive number of delivery vans on the road. While speed and innovation made Amazon a global $800 billion powerhouse, its quick turnarounds and high-demands are behind major injuries to workers and drivers … even to those not employed by Amazon.
Last Mile Drivers
According to Mike Vitulli, managing director, Risk Strategies, Amazon often avoids liability from shipping accidents by employing independent contractors.
“What’s happened is the use of what we refer to as independent contractors — the last mile drivers,” explained Vitulli.
This phrase, “last mile driver,” refers to the person who makes the final leg of a package’s race from the transportation hub to the customer’s house.
“A driver gets into a car accident and their insurance pays all of it or not enough of it,” said Vitulli. “Amazon, by the contract or by the name on the side of the van, has a liability for something that they didn’t really do, but they’re a part of it in some way.”
However, according to Vitulli, Amazon often avoids liability for accidents caused by its subcontracted shippers due to the fact that it has enough money to fight claims — similar to the operations of Uber.
Risks are also catalyzed, especially during the holiday season, due to the volume of deliveries and the number of cars on the road. Amazon itself has estimated it will have about 50,000 delivery vehicles on the road during the holidays this year.
Vehicles that aren’t designed to stop repeatedly or have their doors opened 150+ times a day are more likely to hit something or need repairs. This can be even more expensive, especially for auto insurers, due to the increasing price of vehicles. Not to mention the risk of a claim going to court.
“You have cars that are more expensive to fix, you have jury verdicts and settlements that have gone way up, and that’s driving the prices up for everyone.”
On top of the on-the-road hazards lies the in-house risks. The clock is ticking on the delivery of Amazon orders, and warehouse workers are dealing with unrelenting surveillance and constant write-ups if their demanding quotas aren’t met.
While automation has made warehouses logistically the safest place for an Amazon employee, the company still reported higher injuries than average shipping companies in 2018.
As The Atlantic reported, “Reveal from the Center for Investigative Reporting … amassed internal injury records from 23 of the company’s 110 fulfillment centers nationwide. Taken together, the rate of serious injuries for those facilities was more than double the national average for the warehousing industry: 9.6 serious injuries per 100 full-time workers in 2018, compared with an industry average that year of 4.”
What makes this conglomerate so successful appears to be the root of its injury problem, too: the blistering pace of delivering packages to its customers.
The True Cost of Efficiency
Last year, the Amazon warehouse in Eastvale, Calif. achieved 1 million packages out the door in 24 hours. That sounds like an impressive number, and would be, if it hadn’t been for the “unrelenting surveillance and constant disciplinary write-ups” from Amazon that got them there.
Employee Candice Dixon felt the strain of that need for speed and wasn’t even around long enough to see that goal met. After working in the warehouse for only two months, an Amazon-approved doctor diagnosed her with debilitating back injuries that were completely due to the nature of her job — scanning and lifting over 300 packages per hour.
Dixon can no longer work and can barely climb a flight of stairs. According to The Atlantic, “her condition is unlikely to improve.”
For Dixon, and for hundreds of other former Amazon employees, the toll of a relentless workday is dictating their lives.
“The company’s aggressive production demands have overwhelmed its safety teams’ efforts to protect workers, according to five former Amazon safety managers, who oversaw safety at fulfillment centers around the country and spoke on condition of anonymity because they feared retaliation,” read The Atlantic.
“One of them, a former senior safety manager, said it’s well known internally that the injury rates are too high, but there’s no way Amazon will slow down.”
And for what? Your groceries delivered to your door? The newest iPhone in your hands before the sun rises?
Like other things in life, there are solutions, but not without sacrifices.
“Maybe there needs to be some legislation in terms of the number of deliveries that any driver can make and maybe some surcharges on the price,” suggested Vitulli. Doing this will allow allocation of funds for proper safety training, vehicle safety and driver training.
“Right now, the push is for low cost and speed instead of safety,” said Vitulli.
While Amazon is celebrating its best day ever, some injured workers are suffering their worst. Considering this, it must be determined sooner than later: Just how fast is too fast? &