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Product Recall Insurance now more accessible for Food Manufacturing Businesses

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Reputation is paramount in the food and beverage industry. In a fast-moving, highly competitive, highly regulated, social-media-centric market, food and beverage companies are continually required to jump through hoops in order to establish trust and reliability with their customers.

Further, the numerous processes and variables involved with food and beverage production exposes manufacturers to significant risks. This year alone, we have seen Paleo breakfast bars recalled from supermarkets over safety concerns, a Coles recall on popular salmon products, and full cream milk varieties recalled over E.coli contaminations – to name only a few.

It goes without saying that product recalls can lead to disruptions in business, as well as significant losses in revenue and reputational damage. This can be particularly true when an incident occurs offshore and may be difficult or costly to seek recourse.

The two case studies below highlight how events that may even be outside of the food and beverage manufacturer’s control may lead to damaging losses.

Product Recall Insurance: Case studies

Case study 1:

An experienced yoghurt manufacturer received a phone call from a retailer that stocked their product advising that the yoghurt had a faulty lid that wasn’t closing correctly.

There was no likelihood of any consumers becoming ill, but the retailer chose to withdraw the product from their shelves. The yoghurt manufacturer was charged for the associated costs of the withdrawal.

Typical magnitude of this type of incident:

2000 units affected
Retailers withdrawal cost $141,000

Case study 2:

A business was a distributor of spring rolls manufactured in China. During the production process vegetable oil was substituted with peanut oil. The client was not made aware of the substitution and the product label did not include peanut oil, a known allergen.

The product was consumed by a person with a peanut allergy who subsequently suffered an allergic reaction.

The product was recalled from sale as it posed a threat of injury if consumed. Typical magnitude of this type of incident:

Replacement cost $141,000
Product recall cost: $55,000

*These above examples are based on case studies provided by Liberty Special Markets Australia

Management Liability Insurance

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

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Business Insurance

A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

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Purchase up to six products under one Business Insurance Package.

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*These above examples are based on case studies provided by Liberty Special Markets Australia

Is insurance no longer affordable for food and beverage providers?

One way to counter these risks is through insurance. Traditionally, however, the costs and rigidity of Product Recall and/or Contamination Insurance made it a challenge for companies to invest in the most appropriate cover. Further, there were limitations to the coverage provided.

For example, a typical general Product Recall Insurance package may not cover:

Taste/inedible product due to manufacturing error
Product unfit for consumption due to manufacturing error, with no bodily injury
Replacement costs
Adverse publicity
Loss of gross profits
Customer rehabilitation costs
And more

More accessible Product Recall and Contamination Insurance now available Australia wide – for any size of business

We are currently working with a number of insurers to provide more accessible and cost-effective insurance policies for food and beverage providers throughout Australia.

According to Insurance Business Australia, Liberty Specialty Markets has the largest crisis management team in Asia-Pacific, with underwriters located in Sydney, Melbourne, Brisbane, Singapore and Hong Kong.

They are particularly passionate about (and have extensive experience in) Product Recall Insurance, and as such have developed tailored, more cost-effective insurance coverage for any size of business in the food and beverage industry.

They have rolled the most commonly required covers into one convenient industry policy. The policy can provide:

Coverage for contamination by listeria, e-coli, salmonella or other food pathogens
Coverage for glass, metal or plastic contamination
Coverage for taste/inedible product due to manufacturing error
Coverage for product unfit for consumption due to manufacturing error, with no bodily injury
Automatic inclusion of Product Withdrawal cover
Triggers are closely aligned to the legal requirements to recall under the Australian Consumer Law, and the Australian Foods Codes
A nil Self Insured Retention is automatically applied
Option to add endorsements for Business Interruption and Rehabilitation Expenses
Cover for Replacement Costs once the product has left the client’s possession
Replacement Costs while their product is still at a client’s facility can be added as an endorsement if required

They have also developed a fast claims process – Liberty can settle Food and Beverage claims up to $75,000 within three business days.

Note that the above list is not an extensive list. Are you in the food and beverage industry? Please contact us for more information on this policy or would like to discuss how we can help.

Food Manufacture Insurance for food manufacture

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Alishia Oliver, Crucial Insurance and Risk Advisors, ABN 93 166 630 511, AFSL 451450

This article originally appeared on Crucial Insurance Website and has been published here with permission.