Food firms unaware of contamination risk
insure themselves against accidental or malicious contamination of
their products.
Only 10-12 per cent of companies in the UK food and drink sector have specific 'contaminated product insurance' for their brands, according to Jeremy Moore, a leading risk assessment specialist working for risk consulting practice, Marsh.
His comments follow discussions between Britain's Food Standards Agency, industry and security representatives on how to prevent and manage deliberate contamination of the UK food supply.
An industry source present at the recent FSA meeting told this publication: "In the past the relationship between the food industry and the security services has not been very close. The thinking now is that we have to have this dialogue."
Contaminated product insurance could be a way of helping food firms deal with the costs and fallout from an incident like this, or simply from a production error.
Moore said the public had shown themselves reasonably forgiving in the event of malicious contamination, as long as the incident had been dealt with effectively.
"Contaminated product insurance is a fairly niche product. Smaller producers tend not to know anything about it," he told BeverageDaily.com. Some believed liability policy would be enough, he added.
"But this only covers direct costs of the recall. Contaminated product insurance can also cover brand rehabilitation costs, consultancy used to minimise impact and even third party liability."
Prices have fallen in the market as the sector has become more competitive, making contaminated product insurance affordable for more firms. There are now five players offering contaminated product packages in the UK, with two entering only recently.
Minimum premiums appear to vary, and may range from around £2,000 to £20,000 according to different estimates.
A lot of larger companies look to build up funds to cover themselves when a problem occurs.
But this may not be enough to protect the reputation of their brands if an incident is not handled in the right way, according to Moore, who believes risk management experts like himself should be used more when a crisis occurs.
"Everyone else on the recall team will be defensive," he said, adding this could make it difficult to make rational decisions in the interest of preserving customer loyalty.
He highlighted Perrier spring water's recall over benzene in drinks in 1990 as an example of the need to deal with a problem quickly, openly and effectively. "I would have told them they would be much better being completely up-front with the general public when the first discovery [of benzene] was made."
Perrier's sales have never recovered from the incident in North America.
Moore drew parallels with the salmonella scare that blew up around Cadbury chocolate in the UK this year. The company found salmonella in some products, due to a leaking waste pipe, but failed to recall for several weeks - in which time 37 people were thought to have fallen ill from eating its chocolate.
Costs from the fiasco were put at £20m. It remains unclear how much senior management knew and when, but Moore said Cadbury could have drastically reduced costs and harm to its brand by dealing with the issue when it first arose.
"They may have lost a day of production, but in the knowledge that anything produced beyond that carried zero risk."
