In fact, when you cooperate with United states buyers and professional customers, you need have PLI. What is PLI? And what does it effect? Now let's analysis them.
First of all, what is PLI?
PLI is the abbreviation of product liability insurance. In a word,if your products cause an accident,the third party insurance company is responsible for it.
I sold a chainsaw to United States which was bought by a located customer from the supermarket.Then he went home to make a dog cage , perhaps he didn’t know how to use it or other reasons that cause him cutting his leg and blood dripping.
He took photos and found the supermarket for claim. Of course,we all know the damage compensation is every high in United states,the supermarket will lost $15000.
Because we supply products to United States importers,the importers provide them to supermarket. So we are actually the chainsaw source.Although the supermarket lose money,but they will find its knife importer to pay $15000. Will the importers pay themselves? No,they will find us to pay $15000.
In this case, if we have bought PLI,we only need to pay $5000,insurance company will bear the remaining $10000.The $5000 is the part of SIR which means to take your own part.
As our domestic medical insurance card, we often bear some of the costs and insurance company bears the others when we go to a hospital with health care. Such as it costs ￥800 seeing a disease, we only need pay ￥100,the other part is paid by insurance company.
The same is true of PLI，the insurance part is often assumed “payment” part,and this this is for each case and each accident.
You can imagine that if you haven't bought PLI, you will bear $15000 lost. In addition,if there is a new accident tomorrow which do claim $50000,what will we do.No matter how big your company is and how much your company have, American think their lives are more valuable than them. This claim is very powerful.
So we need to transfer risk to the insurance company when we sell product in American mainstream market.Once the accident happened we only need to bear the smallest part. The other part will be borne by insurance company.
This is the business practice.
We all know it is difficult to meet American customers minds. We don't know if the products will have problems. I also exported ladders before. If customers fell off the ladder and the ladder was detected no quality problems, I still had to pay for it because this was the United States consumer protection business habits. So if there is no PLI,no one is willing to push their mainstream market in US.The anxiety will cause you no sleep.
How much does PLI cost?
It will float from 1% to 4% of the product unit price according to their risk level .Besides,according to customers requirements,there is a 5million dollars upper limit for a certain order when insurance company claims. Each one of the case, every single SIR claim is usually $5000.
That is to say, if the claim is less than $5000, the suppliers bear themselves regardless of the insurance company. The part more than $5000 will be borne by insurance company.