Delta Insurance launches product recall cover aimed at SMEs

Delta Insurance is launching two new product recall policies specifically targeted towards small-to-medium-sized businesses

Specialist underwriter Delta Insurance is launching two new policies that cover small-to-medium-sized businesses against the cost of product recalls.

One of the new insurance products – aimed mainly at manufacturers, importers, distributors, wholesalers and growers – will target consumable products while the other will include consumer goods and component parts. They will provide cover worth up to US$5mn per policy with coverage starting at US$300 a year.

Although product recalls usually affect larger companies, who are better insulated against any potential loss, Singapore-based Delta Insurance says the issue still affects smaller firms. Recalls are costly, inconvenient and interrupt the flow of business, causing reputational damage that fledgling businesses can rarely afford.

In some cases, the recall is no fault of the manufacturer or supplier; Delta cites the 2018 example of product contamination in Australia, where sewing needles were placed inside strawberries in an apparent ‘disgruntled employee’ case. The scandal, which made nationwide news in Australia, led some growers to stop producing berries, while others burned plants en masse.

‘Few affordable options’ available to SMEs

“Traditionally, product recall insurance has focused on the higher end of the market and has been a costly cover with premiums running into tens of thousands of dollars,” says Delta Insurance Casualty Underwriter Oliver Gilmore. “We’ve recognised that smaller companies face the same risk on a reduced scale, but with an impact which can be devastating; not many organisations can or want to wear a US$50,000 or US$100,000 loss – and with product recalls, that impact can come out of the blue.

“In the event of a recall, our comprehensive coverage addresses costs associated with removing and replacing products, and the expenses necessary for brand protection. The policy protects profits and mitigates third party damages, shielding everyone impacted.”

The consumable products policy provides cover for issues including supply chain errors, processing or production errors, distribution errors and losses from adulteration or packaging defects. The consumer goods and component parts cover protects against design, supply chain or manufacturing errors and losses arising from defects or mislabelling. There are a handful of verticals that Delta says the policies are not suitable for.

“While this is a new product category for most of our brokers, the policies are designed to be accessible for the dealer network and their customers,” Gilmore continues. “Most risks are assessed via a one-page proposal form requiring fairly basic information, with larger or more diverse risks going into more detail. We’ll be launching a broker portal next quarter, which will make the application process more streamlined for our brokers and customers. We anticipate brisk demand as word gets out as we feel, certainly in the SME space, this market has not had many affordable options available.”


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