Package delivery insurance: are you covered?

Research by Resolver has revealed that package delivery ‘insurance’ that consumers pay to ensure cover if something goes wrong with a parcel they’ve sent may not be worth the money.

If you have had to send a parcel, either because you’ve sold off some of your unwanted stuff through eBay, you’ve had gifts to send to people or need to urgently get something to someone (but lockdown has stopped this), there’s a chance you’ve considered paying a bit more to your delivery company to ensure you’re covered if something goes wrong.

While most offer ‘standard’ cover for parcels worth up to a certain amount for free, you also have the option to pay more to protect your parcel if it’s worth more, or you want to ensure it arrives. You’d be forgiven for understanding that this means if your parcel goes missing or turns up damaged despite it not leaving your home that way, you then have the peace of mind that you can claim the cost and the value of the package back.

But among the almost 2,000 complaints we saw last year about this service, many reported finding it incredibly difficult to even contact the firm, while others learned that their package wasn’t covered despite paying the money for the ‘protection offered’.

What’s more, a look at the exclusions or ‘prohibited items’ lists uncovered some quite frankly vague results – and some bordering on baffling. Looking at these lists on company websites, we saw Hermes’ was seven pages long (a mixture of prohibited items and those that could be carried but not covered), while DPDLocal’s ‘prohibited’ list spanned more than 170 items. Others were much shorter in length – but partly because they used more ‘catch-all’ terms (e.g. ‘household goods’ in one example).

We’ve also discovered that package delivery firms are exempt from financial regulation for activities related to this cover and so complaints cannot be taken to the Financial Ombudsman Service.

Resolver’s data – package insurance complaints

Complaints made to Resolver specifically about package delivery insurance have been steadily rising, hitting almost 2,000 last year (up 8.5% from 2019), and we saw almost 200 during January 2021.

Our data shows that last year:

More than one in 10 complaints specifically relate to a claim being turned down or their item being ‘excluded’ from cover;
A further 6% of complaints concerned the claim not being paid in full; and
Many reported difficulties contacting the companies to make a claim, to find out why their claim was rejected or even to trace what had happened with their parcel – with some citing having to go through online chat services rather than being able to speak to a human being.

What can you cover?

A look at some of the exclusions lists from the major parcel firms found some baffling results. Some were pages long – including items that could be carried but would not be covered – Hermes’ list took four out of its seven pages. Others including DPD Local and Parcel2Go spanned more than 100 items (Parcel2Go spans a number of delivery providers).

Examples of some of the vague and frankly bizarre items on the ‘exclusions’ list include:

Items which are strapped together (Hermes);
Aromatherapy oils (DPD Local);
Non-perishable food items sent domestically, including pasta, biscuit, cereal, canned food – covered for loss but not damage (Parcel2Go);
Memorabilia, photographs, signed items and vinyl records (Hermes);
Packaging – including The Box, Media packaging, suitcases/flight cases used as packaging (Parcel2Go);
Household goods and personal effects (DHL); and
Clothing (DPD Local).

DPD Local has told us it thinks ‘clothing’ was on its prohibited items list in error. It has since removed it from its list and is “conducting a full review into how this happened”, adding:

“We operate on a shared responsibility basis on the item description. We are constantly trying to improve the ability of our system to identify prohibited items to customers, but because many descriptions and spellings vary this isn’t always 100% effective. As such we flag in a number of areas that the customer must read and accept the prohibited list. We make this clear to customers on a number of occasions through the customer journey.”

Is parcel cover regulated by the Financial Conduct Authority (FCA)?

The FCA’s remit is set by legislation. In 2007, new legislation was introduced that takes parcel delivery firms out of scope of the FCA’s regulation with regard to insurance for the items they transport.

The relevant legislation concerns ‘freight forwarders’ (companies whose principal business is arranging or carrying out the transportation of goods). These companies are not carrying on a regulated activity where they:

hold an insurance policy for the loss of, or damage to, goods which they transport; and
make available to their customers the right to claim directly against the insurer in respect of loss or damage to those goods.

As a result, delivery companies are unlikely to be performing a regulated activity when they sell parcel delivery cover. This also means that complaints cannot be taken to the Financial Ombudsman Service.

How firms treat claims

We asked the major courier firms, DPD (whose terms and conditions state that its DPD Local website is powered by Parcel2Go, and as such a customer’s contract is with that organisation), Hermes and DHL for some clarity on their cover offerings. Currently only DPD has responded, stating:

“All claims against this cover are treated the same whether it is in the base product or its extended cover that has been added to the service.

Customers can claim via contacting live chat or going through the help centre. The customer will be asked to provide evidence of the value of the product sent and if it’s a damaged parcel, evidence of any damage. When the claims team have the evidence, they pay the claim.”

DPD adds that the terms and conditions are on its website and customers must acknowledge they have read them and “any enhanced protection purchased is detailed as a separate line in the price breakdown. The customer also receives a confirmation email”. It insists that its help centre home page is “very clear on how to claim” and “customers who need to make a claim are taken through the online process”.

Lack of contact – and details

Our complaints data showed many explicitly saying that they couldn’t even contact their parcel delivery firm to make a claim. Some reported having to use an ‘online chat’ to make contact, while others simply couldn’t get hold of a human being despite having a phone number.

There were also incidences of claims being flatly rejected with no explanation – or how a customer could challenge this, while others were simply looking for answers to questions on what to do to make a claim.

A search on company websites found no clear terms and conditions upfront to cover exclusions beyond what items were or were not covered (such as type of packaging used, sizes) or what was needed to make a claim, such as photo evidence to display damage. In terms of the purchase point, often you simply enter your package size and what it contains and get a cost, which you can then choose to pay.

We believe what you’re getting upfront is not fairly or clearly spelling out and we think parcel delivery firms should be explicit to their customers before taking their money for cover that may not be worth the paper it’s (often not) written on.

Resolver CEO Alex Neill recounts her own experience of purchasing this cover to send Christmas presents, and explains how it left her with more questions than answers. But we’d like to know what your experiences have been as we will continue to explore this issue. Contact contributions@resolvergroup.com if you would like to let us know what happened – and how it was dealt with. But if you want to complain – use us for free.