South Australian food and beverage businesses may think they’ve got their product recall strategy covered – but insurance cover is predominantly inadequate and most businesses are under-prepared for a crisis.
Food South Australia CEO Catherine Sayer says it’s a problem the industry association has been working on for over 2 years.
“We know recalls are getting more and more complex and costly, particularly as our food and beverage manufacturers expand into new markets,” Ms Sayer said.
“The costs associated with a full recall definitely have the very real potential to put an otherwise profitable operation out of business.”
Food South Australia has hosted one workshop on product recall planning and is hosting another focusing on understanding product recall insurance policy options in April this year.
The association, which is the peak body for the food and beverage industry in South Australia, has also been developing a product recall insurance cover package for its members with industry specialists Victual.
“Our first workshop was booked out very quickly, with many more businesses asking for more information and help,” Ms Sayer said.
“It’s a very complex area, which is why we are working with Victual to help our manufacturer and processor members to better understand what is and isn’t covered, how to get themselves into the best possible operational status to handle a recall if they have to – and, by being prepared, help them control their insurance costs.
Ms Sayer said there are a number of actions businesses can take to put them in the best possible position to reduce premiums.
“For example, having a fully detailed strategy that is reviewed regularly and thoroughly tested, by having a trained nominated spokesperson and by understanding the crucial role elements like social media will play if you do have to undertake a recall,” she said.
The average global cost of a recall is US $10 million and almost 40% of Australian food and beverage businesses are significantly under-insured.
David Goodall, Director of Victual Recall, said businesses should be reviewing their level of cover regularly as these costs climb, adding that it is also critical to understand what is actually covered by your policy.
“Basic ‘add-on’ policies bundled with your other insurances may actually exclude key areas of coverage such as replacement costs or your customer’s loss of profits, which for a food manufacturer could be financially disastrous,” Mr Goodall said.
“You wouldn’t spend thousands on a car without first assessing whether it’s right for your needs, and we should all be looking at our product recall insurance the same way. We encourage every business to carefully check their policy wording as well as giving careful consideration to their level of cover.”
Food and beverage manufacturers can book for the Food South Australia Product Recall 101 Workshop on 2 April via the Food South Australia website here.
Food South Australia members can find further information on the Members Product Recall Insurance here.