Premium protection for farm businesses
By Peter Mitham
By Peter Mitham
Trouble may be the last thing business owners plan for when they set up shop. Preparing for a catastrophic event, such as an outbreak of food-borne illness or a product recall, is often the last thing businesses expect to face.
“They go in because they want to make money, they want to create jobs,” an account executive with Reliance Insurance Agencies Ltd., Mark Johnson, said. “But with that comes the risk, and how you manage that risk is very important to your business.”
Some fail to take stock of the threats to their business, others ignore the risks altogether in favour of saving a bit of cash. Some worry but do nothing. Others buy insurance, but aren’t fully aware of what’s covered.
“Get proper insurance, or at least know what’s available and consider the options,” Johnson said.
Some of the key risks farms and food processors face are in the area of food safety. While many farms have food safety programs in place, the failure of those protocols creates a whole new business environment requiring a whole new set of tools.
A food safety incident will bring significant costs not only in terms of lost sales, but a damaged reputation and even potentially crippling lawsuits.
But it doesn’t have to be that way, thanks to various forms of insurance available to producers. While many business owners think commercial general liability insurance is sufficient, Johnson said this insurance only applies when personal injury or property damage has occurred. It doesn’t cover a recall, which is in a separate category.
Product recall insurance, for example, covers administrative fees related to a recall. Typically, it covers the costs associated with a recall ordered by government rather than a voluntary recall. Product losses attributed to the recall are not covered.
General recall insurance is triggered by accidental contamination, malicious contamination, and cases of extortion. It also includes government-ordered and voluntary recalls.
The insurance can be structured to cover third-party costs, crisis response costs, rebranding and loss of profit.
Johnson said his agency works with companies to assess their exposure to risk and identify steps they can take to reduce exposure in areas ranging from properties to food safety. Having appropriate preventative measures in place can help reduce exposure, and in turn, insurance premiums.
“If you’ve got all the right things in place, you’ll be paying less for your insurance,” Johnson said.
Focusing on domestic markets can also help reduce insurance costs, he added.