Managing Shipping Claims: How to Recover Lost Revenue and Prevent Future Delivery Failures

In 2024, damaged deliveries cost businesses an estimated $2.92 billion. Yet, many companies are absorbing this cost rather than claiming compensation through their carrier’s shipping claim process. Why?

Yes, shipping claims involve lengthy paperwork, drawn-out processes, and unhappy customers; but they also help recover lost revenue while providing unique insights into and opportunities to improve carrier performance.

So, if your eCommerce business is leaving money on the table by commonly ignoring claims or filing them incorrectly, read on to learn how to improve your compensation success rate and carrier performance at the same time.

Back to Basics: What Are Shipping Claims?

Shipping claims are a way to recover costs and prevent future losses arising from packages that carriers don’t deliver as they should.

Common types of shipping claims

There are five key types of shipping claims for eCommerce businesses. These are:

1. Damages: Products that arrive damaged
2. Losses: Packages that go missing during transit
3. Shortages: Where only part of an order is delivered
4. Delays: Orders that arrive late
5. Overcharges: Shipments incorrectly charged

Carrier liability vs. shipping insurance

Carrier liability is the default coverage provided by your shipping carrier, usually included in the price. Typically, carriers limit liability by service level, package weight, and package value, meaning that any compensation might not fully cover your losses. Carriers also often exclude damages caused by factors beyond their control (e.g., natural disasters) and damages arising from improper packaging.

Shipping insurance is optional coverage purchased by the shipper, typically covering a higher value and broader range of risks than carrier coverage. Shipping insurance tends to pay out quicker, with fewer hurdles, but this comes at a cost.

Many eCommerce sellers opt to buy shipping insurance in addition to carrier liability for high-value or sensitive shipments.

Why Shipping Claims Matter

Lost, damaged, late, and incomplete deliveries are frustrating, to say the least, and have a significant knock-on effect on eCommerce businesses. With 10% of packages arriving damaged on average, a mid-sized eCommerce business shipping 12,000 parcels a month could be handling 1,200 claims per month! A significant figure that negatively impacts:

Time

From the initial query and arranging the refund/replacement to updating your systems and adjusting your accounts, delayed, damaged, and lost package claims consume significant time.

Related reading: Mastering eCommerce Returns and Reverse Logistics

Cost

When a parcel arrives damaged (or not at all), you not only have to absorb the cost of the item itself, but also pay for a replacement item, additional packaging, reshipping, and any labor costs.

Customers

58% of customers won’t shop with a retailer again following a poor delivery experience. Damaged, lost, or late packages lead to higher negative reviews, increased customer churn, and lower customer lifetime value.

Performance

Shipping claims can ultimately reveal broader problems, with patterns indicating inefficient packaging, fulfillment errors, and carrier reliability issues.

Then there’s the time and cost of pursuing a shipping claim itself; it’s no wonder many eCommerce businesses absorb the cost and let it fly. But the key takeaway here is that shipping problems and unrecovered claims don’t just hurt the profit of a single order; they snowball to affect the future of your eCommerce business, which is why pursuing claims and tracking data is crucial.

How to file a claim (step-by-step)

Most shipping carriers have their own claims process, but filing a shipping claim should be straightforward regardless.

Check your contract and SLA

First, check your carrier contract and SLA to identify:

• The deadline for filing a claim
• The types of claims accepted
• Any liability limits
• The documentation required to file a claim

Gather documentation/evidence

Promptly gather the documentation and evidence required to submit a claim, most commonly: tracking number, proof of value (invoice/receipts), incident/customer service notes, and photos of any damage/packaging.

Submit claim

Submit your claim through your carrier’s portal.

Track

Stay on top of your claims by tracking status, responding to any additional requests, and chasing when your carrier falls behind their stated deadlines.

The top 3 reasons claims fail

While the step-by-step process sounds simple, in reality, many claims fail. The most common reasons for failed shipping claims are:

1. Missed deadlines or incomplete documentation
2. Packaging violations that void carrier liability
3. Inconsistent information between customer service notes, warehouse records, and carrier scans

Tip: We recommend standardizing your internal shipping claims processes, to include:

• Photographing all damage
• Immediately logging information on your WMS/OMS/TMS
• Diarizing all key dates
• Creating a standard ‘claims completion checklist’ per carrier

Facilitating Carrier Claims

The problem with manual shipping claims is scale; as soon as you’re handling multiple claims across multiple carriers, the process becomes too time-consuming, messy, and impractical. Automation isn’t the best answer either, because automatic processes can overlook or misunderstand something that makes sense to a human eye. Filing too many rejected claims also gives brands a bad record that will hurt their reputation when it comes time to file a legitimate claim.

We recommend having a team with decades of shipping experience monitor, evaluate, process, and manage shipping claims for your brand. Expertise makes the work go faster, and can catch things the untrained eye would miss.

For iDrive Logistics customers, this looks like a simple form to fill out in the iDrive carrier portal that will go straight to our team to assess and facilitate. Rather than spending time filling out and chasing claims, our customers can just fill out a form then trust us to do the rest.

Using Claims Data to Improve Carrier Performance & SLAs

Shipping claims aren’t just about recovering lost profits (although that’s a benefit); they’re also about carrier accountability and ensuring your carriers are performing to the required standards and to your agreed SLA. To achieve this, you must do three things:

Build a claims analytics framework

Track claims by carrier, service level, SKU, and package type to quickly identify problem carriers and root causes. If you link this data to your carrier scorecards, you’ll soon get a wider view of each carrier’s performance.

Feed insights back into operations

Share trends in claims data with your operations team and/or fulfillment partners to test changes, such as packaging redesigns, cartonization adjustments, staff training, and quality control checks.

Further reading: eCommerce Packaging Optimization

Know when to renegotiate or switch carriers

Damaged, late, and lost packages happen—it’s not unusual. However, when exceptions become the norm, it’s time to evaluate your carrier relationships. Before renegotiating SLAs or switching carriers, it’s critical to:

• Quantify the full costs of carrier failures, including product losses, reshipping expenses, customer support time, and the negative impact on customer lifetime value.
• Use clear, clean claims data and carrier performance metrics to build a case for stronger guarantees or better contract terms.
• Watch for red flags that signal it’s time to explore alternative carriers, including:
  • On-time delivery rates consistently below SLA targets
  • High damage/loss rates compared to industry benchmarks
  • Increased shipping-related customer complaints
  • Hidden costs mounting, such as reshipments and customer churn
  • Carriers missing their own claims resolution deadlines.

By leveraging claims data to understand your carriers’ performance, you can negotiate carrier contracts with confidence and decide whether switching carriers or adopting a multi-carrier shipping strategy is the best path forward for your business.

Conclusion

We know that shipping claims are an all-consuming administrative process that takes you away from your business. Still, they’re essential tools for recovering lost revenue, analyzing carrier performance, and improving the overall delivery experience for you and your customers.

By mapping your current claims data, introducing a standardized process, leveraging industry expertise, and using analytics tracking and carrier benchmarking, you can turn your shipping claims process from a source of pain to one of success.

At iDrive, we help simplify claims management by streamlining recovery, benchmarking carrier reliability, and helping you close the feedback loop between claims, carrier performance, and fulfillment accuracy. Contact us today to make claims a piece of cake.