In recent years, purchasing food product recall and contamination insurance has become more common as food producers seek to reduce their risk. It’s become more prevalent as companies stop self-insuring due to the serious potential financial and brand consequences of recalls. Even large food producers are considering recall liability insurance as they face potential lost revenue from a costly recall. For small companies, a recall can put them out of business.
Yet, many food producers may still be missing the relationship between representative sampling at various stages throughout the production process and their liability insurance rates.
Sampling Improves HACCP, Reduces Risk
Insurance underwriters view a food producer more favorably when it demonstrates due diligence in creating a food safety plan that includes measures to reduce its risk. Food manufacturers need a provable quality and food safety plan in place in order for an underwriter to issue a policy. They cannot purchase recall insurance without a well-defined Hazard Analysis Critical Control Point (HACCP) food safety plan, including food sampling and testing as a critical control point. In some cases, an insurer or underwriter won’t write a policy unless they design sampling into their HACCP processes.
In addition to food and beverage sampling during the production process, testing finished goods helps reduce risk. “Sampling and testing finished products is one way that food companies can substantially decrease their risk and exposure because they are in a better position to identify and then divert positive product,” says food industry attorney Shawn K. Stevens of Food Industry Counsel LLC.
It’s better to find contamination in finished products while they’re still under your control in your facility than to be told by your customers that your product is contaminated after it left your facility and be in a circumstance where a food product recall is necessary, explains Stevens. The data provided by automated food sampling and testing could be very valuable in establishing process control in the event there is ever an isolated incident involving positive tested products.
Sampling Affects Insurance
According to Blake Creager at Heffernan Insurance Brokers, throughout the food industry, from the field to the fork, the last 15 plus years have seen an increased focus on product contamination and testing of food ingredients as well as final products. Creager says food and beverage sampling and testing of a producer’s products is paramount for insurance companies when writing a program that will protect the insured. “The ultimate goal for the manufacturer is to protect the label and the company,” explains Creager. “Without contaminated products insurance, manufacturers are left vulnerable to out of control expenses, loss of revenue and third party vendor contractual obligations if a recall occurs. Contaminated products insurance addresses all of these issues which can be a game changer for a company that is facing a food recall in an FSMA environment.”
“The FSMA and current HACCP regulations in accordance with the FDA have made the need for food and beverage sampling essential,” says Michael Coughlin of Coughlin Insurance Services. “Automated food sampling equipment provides consistent, monitored sampling, that can prevent claims to begin with, as well as support the fact that product was or was not contaminated through monitored testing results and documentation.”
Stevens says some insurance companies are open to decreasing premiums for food companies who are conducting robust inline product sampling and testing. Coughlin has seen reductions in annual premiums for product liability and food recall insurance of up to 25% for companies using automated sampling.
Food recall insurance is not only becoming wise, but essential for more food manufacturing companies. Recall insurance coverage can be a big safety net and is worth having rather than taking on the risk and cost of a recall. Making food and beverage sampling a part of a HACCP food safety plan can make it more robust and therefore more favorable to insurance underwriters, which can lower annual insurance premiums, making automated sampling worth the cost.