Clients shielding industry from true cost of product recall

Clients shielding industry from true cost of product recall | Insurance Business

Clients shielding industry from true cost of product recall
Three of the five food and beverage product recall scenarios in Australasia are in Australia but it is still not uncommon for organisations to shield brokers and insurers from the true cost of such events.

AIG Australia crisis management manager Claire Richards told Insurance Business TV that food and beverage product recall scenarios can be “complex and expensive”. Some food and beverage manufacturers may not know just how large the financial impact of a recall scenario can be, and others will not disclose the full costs.

“Given that most food and beverage manufacturers won’t go through the process of quantifying a recall the potential impacts can be quite surprising and terrifying to those organisations that don’t have a robust product recall plan in place.

“On average we are seeing five recalls per month in Australasia in the food and beverage industry and of that two to three of those are in Australia alone. It’s not uncommon for food and beverage manufacturers to not disclose the costs associated with a product recall which can give a false impression to the industry that these costs are manageable."

AIG has created a web-based service called NOVI, which estimates a company’s probable maximum recall loss in the event of an accidental contamination, therefore giving insurers, brokers and their clients an accurate indication of costs.

“It encourages food and beverage organisations to know their numbers […]. It helps organisations to quantify their financial impact of a product recall resulting from an accidental contamination and make more informed decisions about their product recall exposure."

Richards said brokers should encourage their food and beverage clients to have a comprehensive product recall plan.

“Brokers will know that all of their food and beverage clients will want to prevent an incident from escalating into a crisis so they can help them put in place a comprehensive product recall risk management plan which will include input from themselves, insurers, food and safety experts and crisis management consultants.”

Watch the full video by clicking here.