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4 Types of Insurance You Should Have If You're In the Food Industry in Asia

  •   3 Jun 2019
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Food safety is a global problem affecting not only Asia but the whole world as well. When you have a food company within Asia, you may largely have connections with the global food manufacturing and supply market. China is the world's biggest exporter of products, and there are certain regulations and legal obligations you must meet to boost your company's reputation, protect your business from disasters and provide better avenues of growth and success. One of the steps you need to help your business grow is insurance.

Insurance alleviates stress and provides the support and confidence you need to grow your business. In many situations, it can protect your business against litigation or help pay for damages incurred by accident or problems with your product. Naturally, you don't need all kinds of insurance, but there are four important business insurance types you should have to be able to perform your food business operations in peace. These important business insurance covers include:

Product Liability Insurance

Because your products are very sensitive, you have to get the Product Liability Insurance cover. According to China's regulations [1], this is an important obligation to ensure that your products are carefully monitored and of the highest quality. On the flip side, it is perfect support in any event where one or more of your food products are found wanting. When your company is working hard towards building a reputation in the industry, accidents such as food contamination and poisoning may occur which may need large court settlements and may even cause damage to your brand or cripple your business.

Product defects, especially food product defects, endanger the safety of the lives of your consumers. A sad but largely significant event to note was the melamine milk powder accident of 2008 [2]. In this particular case, 1.5 to 6 times higher non-protein nitrogen and melamine were contained in the product. Melamine is a poisonous substance used to freshen milk. Due to its use, over 290,000 infants suffered several stages of nephrolith of which about 6 of them diet from it. 

Product Liability Insurance is designed to cover claims that may come up when property damage or personal injury occurs as a result of using your food products. This kind of cover includes the expenses incurred in the course of defense, investigation and litigation, production or manufacturing flaws, defective warning, and adequate instructions.

Cargo Transportation Insurance

Would you export or import food products? Then you need to consider getting cargo insurance. When cargo is in transit, there are a lot of unpredictable things that can happen. Some of it includes aviation accidents, lost ships, armed robbery or piracy, and many more. No matter the kind of security you have on board with your cargo, you can’t control all of these conditions. If such events occur, you may suffer loses. A look at wkwebster.com's list of casualties [3] between 2018 to 2019, records well over 10 different cargo casualties caused by different factors including fire, engine failure, collision, and cargo overboard. 

Therefore, getting a cargo insurance plan is an excellent way of minimizing the risks or losses incurred in such events. Cargo insurance may include cover for relevant charges and loss of insured goods caused by accidents or natural disasters while in transit.

Property Insurance in China

Regardless of the size of your food business, you face a unique set of risks to your business assets and properties, which may lead to loss or damage and ultimately affect the growth of your business. Beyond the pained loss of human lives is the loss of properties and goods in the most recent March 21st fire outbreak in China [4]. According to one report, there have been many recent cases of fire and accidents amounting to losses of lives and properties. A property insurance package may help protect your business properties and its contents against exposures of fire & some other named perils for your business assets as well as the loss of profits against physical destruction, explosions, burglary, storms, theft, damage or physical loss to your properties. It helps minimize the impact of such events by providing funds for reestablishing your business. 

Business Interruption Insurance

Business Interruption Insurance is an essential cover that helps insulate your business when you incur business suspensions as a result of damage to physical assets (as contained in the policy). It helps provide peace of mind and confidence against insured perils, including a fire which may interrupt your business operations. This insurance plan typically covers financial expenses and may help you repair and rebuild your business. A very worthy lesson is learned from the port of Tianjin, which is known for its advanced industrial activity.

In August of 2015, a massive explosion [5] ripped this port apart, resulting in over 165 deaths, 778 injured, 7,500 containers, 304 buildings, and 12,500 vehicles damaged. A business within such a location may receive funds to cover the loss of profits following such an explosion. Having a Business Interruption Insurance policy is, therefore, a necessity because it protects your business against a financial hardship that may result in long term consequences.

Insurance is extremely beneficial for your business. It may cost a lot at first and may seem as though it is an investment without profits. However, there are too many uncertainties in your business, and having a good insurance cover is not only a legal obligation but, equally necessary to keep your business one step ahead of your competitor should there be any unwanted event. Nevertheless, it is important to note that when looking for the right insurer, shop around so you can get the best insurance covers well suited to your business needs. Bearing this in mind, you can look forward to the best price and the right policy appropriate for your business. Getting the right insurance covers for your business is not only worthwhile, but it can also help you stay confident and focused on growing your business.

Reference Link

[1] Liability insurance proposed for food industries, China Daily
[2] From remedy of damage to risk prevention. An analysis of the new legislative implications of the chapter on “product liability” in China’s tort liability law from the perspective of consumer protection
[3] wkwebster.com’s list of casualties
[4] China struck by another industrial fire as 47 killed and 640 injured in pesticide plant explosion
[5] Lessons From the Tianjin Explosion - Business Interruption and Contingent Business Interruption

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China Expat Health

An insurance expert and the director of IPMI at China Expat Health.