Risk Management

Managing Risks of Product Recall

 The impact from a product recall, if not managed correctly, can emerge rapidly and threaten your business, employees or customers. Contamination in products continues to create havoc for consumers and business around the globe. Whether the contamination is accidental or the result of a product tampering there is an insurance solution available which protects all aspects of the food, beverage, cosmetics and pharmaceutical industries.

 

Why buy recall insurance?

Product recalls are not the most common of claims but the financial impact can be severe. Regardless of how good a client's procedures and testing may be, all it takes in many instances is for one employee to have a lapse in concentration and suddenly an incident has occurred. This one mistake can often lead to substantial loss.

Not all incidents are unintentional or accidental. Recalls can also occur because of malicious tampering. There are many high profile cases of products being tampered with on the shelves. However,  of even more concern for companies should be "internal tamper" on the production line. These tampers do not always receive the same publicity but can have an extreme impact on a company. In most of these cases the procedures and controls a client has in place will have little or no impact on the likelihood of a tamper, because it is wilful action rather than accident which causes it.

Below are some actual examples of the potential financial impact of an incident:

Pre-prepared meals                                                                          Client’s turnover             $12m                                                                      Size of product recall claim    A$1.4m

Beverage                                                                                           Client’s turnover                    A$ 9m                                                            Size of product recall claim      A$ 1m

Snack Food                                                                                       Client’s turnover                   A$ 6m                                                             Size of product recall claim    A$ 250k

Dessert                                                                                              Client’s turnover                   A$ .5m                                                              Size of product recall claim    A$ 100k

 

What is Contaminated Products Insurance?

 

In the event of an Accidental Contamination, Malicious Product Tamper or Product Extortion a Contaminated Products Insurance policy can provide financial protection to businesses in the food, beverage, pharmaceutical and cosmetic industries including:

 

• Business Interruption

• Replacement Costs

• Recall Costs

• Third Party Recall Costs

• Consultants & Advisor Costs

• Rehabilitation Expenses

• Extortion Costs

One of the biggest misconceptions is that product recall coverage is available under a standard public and products liability policy. In most such policies product recall is excluded. If some limited cover is provided via recall expense cover, the coverage limit provided is normally very small compared to the overall exposure.

As public and products liability policies do not cover the client’s own losses, there is no cover for replacement of the product, additional expenses to re-establish sales or loss of profit as a result of an Insured Event.

What assistance can I get if I have an incident?

One of the most important benefits under a contaminated products insurance policy is the expert specialist crisis response consultants payable under the Consultants and Advisor Costs section of the wording. The consultants can help the client respond swiftly and effectively to a product contamination incident, as well as planning for and managing the risks associated with a potential incident.

The expert consultants available include food technologists, malicious product tamper experts, crisis management experts and public relations assistants.

  

Latest News

High Court dismisses Business Interruption Test Case

Today the High Court dismissed appeal by Insurers on the Business Interruption test case. Even the big insurers make silly mistakes! But you the policy holder may benefit if you were one of the 40% of Business Pack policy holders that added Business Interruption cover to their Business Pack. While it was never the intent of insurers to cover policyholders for the loss of income from a pandemic, the fact that insurers never factored in a risk premium for it, and the fact there is supposed to be a material or physical loss to trigger the Business Interruption section, none of that matters according to the highest Court in the land. So what was the mistake? Simply that when insurers defined what they considered to be the definition of an infectious disease, they referred to the Quarantine Act of 1908 which since was superseded by the Biodiversity Act of 2015. Because the Quarantine Act of 1908 no longer exists, apparently you cannot draw on this for a definition of an infectious disease? Not one of the insurers picked up on this! Shows how much interest we take on the business of Governments, except what is reported in the media.

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Three Years running - Insurance Brokerage of the Year 1 to 5 staff

Mandy and Robert Cooper were extremely honoured and astounded to once again win, Insurance Brokerage of the Year for 2020 from Insurance Business Australia magazine. This is the third year running.

While this year has not been the easiest of years for the business with Covid 19, the Recession, the hard market and issues at Lloyds of London, we are literally all in this together as an Insurance Industry.

CPR Insurance Services continues to make our clients the number one focus of our business while managing our relationships with Insurers, who we need more than ever in this market climate.

CPR Insurance Services are a highly ethical Brokerage with a reputation as a trusted advisor who always acts in the Client's best interests. Their experience, knowledge and expertise is amongst the highest in the industry.

CPR Insurance Services is now ten years old as a business and is proud of being an Authorised Representative of Ausure and their partnership with Steadfast, giving CPR the strength and backing to match it with any Broking firm in the Insurance Industry, but remain focussed on supporting the Small to Medium business segment.

Memberships of the National Insurance Brokers Association, Australia and New Zealand Institute of Insurance and Finance, Australian Insurance Law Association, Australian Professional Indemnity Group and the Australian Institute of Company Directors, ensures CPR Insurance Services maintains the high standard of knowledge and expertise required to be one of the best Brokerages in Australia.

CPR Insurance Services also plays a strong role in their local community supporting other Sporting Clubs and Community organisations. They also support and promote local businesses with their operation of the Kedron Brook Business Group who meet regularly and has 174 members.

We are truly honoured to receive this National award once again for the third year as a recognition of CPR Insurance Services contribution.

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