After the Maggi fiasco, food and beverages companies are buying contaminated or product recall insurance policies to cover huge losses they would suffer in the event of forced withdrawal of their products from the market.
Tata AIG General Insurance Company and New India Assurance Company are two companies that are seeing higher enquiries and sales to food and beverages companies.Tanuj Gulani, vice-president, speciality lines and reinsurance at Prudent Insurance Brokers, said, “After the Maggi episode, there is a frenzy in the Indian market to buy this cover, something that we have not witnessed before.
We are working on a couple of insurance covers for edible oil companies, alcoholic and non-alcoholic companies rice exporters and other food companies. Contaminated product insurance covers all issues related to recall, mislabeling, business interruption, and impairment of the products.”
The cost of premium for the product will vary from Rs 7.5 lakh to Rs 20 lakh depending on the kind of the product, turnover of the company, whether it is exported overseas or sold in the domestic markets. If the products are exported overseas, the premiums will be higher as recalling from overseas markets is very expensive.
Maggi, according to industry experts, was only covered for product liability with a leading general insurance company and it spent close Rs 300 crore in recalling the product and another Rs 23 crore to crush or destroy the recalled Maggi packets.
According to an insurance expert: “The product liability cover for the company was only to cover the litigation cost if someone consumed Maggi got ill and then filed a suit against the company.
The insurance would cover the litigation cost and cost of damages to the person and not on the extensive loss that the company is facing..”Sushant Sarin, senior vice president, commercial lines, Tata AIG General InsuranceCompany, said: “There is a spurt in the enquiries from food and beverage and topical product companies, apart from cream and soap manufacturers.
Earlier we were doing about 10 to 15 covers a year and about 3 to 4 covers in a month. But now we could do multiples of that as companies become conscious of protection.”Disgruntled employees contaminating a product is very common issue in food product and topical product companies.”The contaminated product insurance that we sell cover all aspects of a recall like bearing the cost of recall which can be very expensive, the corporate communications and brand rehabilitation for the company,” added Sarin.
Tata AIG covers for the loss of the gross profit, money spend on the rehabilitation and your brand value loss, and even for malicious contaminated.New India Assurance Company has a Contaminated Product and Recall Product Insurance which is an add-on product to the product liability insurance.
“A senior official in New India Assurance said: “We have seen a rise in enquiries of about 10% to 15% on the product in the last two month ever since the Maggi episode broke out. We are yet to assess the impact on our sales. More companies are likely to be protected against such ugly surprises.”Contaminated Product Insurance covers all food and agricultural products, juices, soft drinks, cosmetics lotions, pharmaceuticals products and broadly anything that can be consumed or applied that poses a potential threat to health. – From Daily News Analysis