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While rates for most insurance coverages—including property and casualty, cyber risk, and others—have increased over the last 12 to 18 months, rates for product recall coverages have actually dropped over the same period of time.

Product recall coverage has traditionally been viewed as an ancillary item that many businesses in the food and agriculture space haven’t felt is necessary. It was often considered overpriced and unaffordable, but that is no longer the case.

Instead, food and agriculture businesses are realizing that recalls do happen and that no one is invincible. As a result, more and more companies are considering recall and contamination coverage.

Additionally, the supply chain disruptions of the past year have resulted in less frequent inspections and regulatory oversight as producers and distributors have raced to get products to the consumer. As the economy begins its return to normalcy, it is anticipated that government inspectors will ramp up the frequency of their site visits, increasing the chances for facility shutdowns and government-mandated recalls.

To safeguard against this, businesses should consider adding product recall and contamination coverages to their existing policy portfolio.

What’s the Difference Between Recall and Contamination Coverage?

Both product recall and contamination coverages deal with the same basic problem: the occurrence of some accidental factor that has rendered a product contaminated. This contamination can take place anywhere along the supply chain—in your own facilities, in a third-party manufacturer or packer, or within the distribution process. This contamination renders the product such where its use or consumption would result in bodily or property damage.

While these two types of coverages often get lumped together, there are some very distinct differences between the two that a business owner should be aware of. These differences can affect your business’s eligibility in the event of a loss.

With a product recall policy, the insured cannot file a claim for loss unless an official recall has been issued, either by the manufacturer or by a government agency, such as the Food and Drug Administration or the U. S. Department of Agriculture. A recall occurs when a product is available in the marketplace and requires the removal of that product from the market itself.

A contamination policy differs in that the product does not have to be released to the public to be covered. A product that is determined to be contaminated prior to making it to the marketplace would be insured under this policy but would not be covered under a recall policy.

Offering Balance Sheet Protection

A lost product or crop can be catastrophic to a food and agriculture business. While other coverages can provide risk management for crops that are unable to be harvested, product recall and contamination policies can protect your product even after its release to the marketplace.

In this way, product recall and contamination insurance can be seen as balance sheet protection for your business. A policy can reimburse the business for not only the cost of the recall itself but also for the actual cost of the loss of the product. In some instances, a policy could also cover additional expenses such as staff payroll in the event a facility is required to be shut down.

What Else Should I Consider About Product Recall Insurance?

Changes to the insurance marketplace have resulted in many new markets in this space, leading to an increase in the number of options for food and agriculture businesses. Good companies with top quality control mechanisms in place stand out and are often viewed as best-in-class to insurers.

Because of the additional markets available, businesses should consider the overall coverage when comparing options. Premiums, quality, claims advocacy and reputation should all be weighed when determining the best fit for your agribusiness.

Contact our team if you’re ready to discuss your food and agriculture insurance coverage. We can help determine the right level of protection to fit your agribusiness.

Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy