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
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.
This article was written by Alishia Oliver,
Account Manager at Crucial Insurance and Risk Advisors.
For further information or comment please email info@crucialinsurance.com.au.
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