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17 August, 2019 23:44 IST
Maggi brings cheers to General Insurance Companies
Source: IRIS | 16 Jun, 2015, 11.38AM
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  The saga of Maggi's raging fiasco in India has paved way for another vibrant business stream for the general insurance industry in India. Surprised, what is that? Yes, more and more companies in India are going all the way for getting product recall insurance for their products. Well, it is rightly said - better late than never.

Product recall insurance is not new to the corporate world. But it was mainly popular in the four-wheeler vehicle industry and some other industries which are capital intensive and where the product value is quite high. Often, we come across news about car companies calling their cars back due to some technical glitches. The companies include Toyota, Hyundai and even Mercedes and several other car manufacturers. These companies take product recall insurance, in order to cover cost of recall and other associated costs related to the process.

Food industry, at the other end, was never bothered about this type of insurance. The industry is such a huge one. But, at the same time, we have to take cognisance of the fact that the value of product is relatively very low. Plus, in India, there are hardly any major incidents of product recall in the food industry. Although after the Maggi controversy, things are changing and that too at a fast pace.

Food and beverages companies have understood that after Maggi, vigilance agencies and media will start examining many other products - and their products could be amongst those. This is why, general insurance companies in India are flooded by product recall insurance related enquiries from the food and beverages companies.

Product recall insurance is a part of product liability insurance. With Maggi throwing doors open for insurance companies, it is likely that many other sectors will wake up to the call.

For instance, companies from the pharma sector could be amongst the ones reviewing their product liability insurance arrangements.

There is no second thought that a Maggi kind of disaster can devastate the reputation of company very badly and it can bring serious consequences- even threatening the existence of a company. Product recall insurance can help cover some bit of the tangible losses caused by such controversies. Although it is quite clear that the loss of reputation and goodwill can never be recovered under such circumstances.

In countries such as the United States of America (USA), food companies are very strictly regulated and governed by government agencies. Why not? Food is such a basic and fundamental thing. It can hurt one’s health in a serious manner. There are numerous examples wherein food companies are penalised for not following certain directions or including ingredients in their products which are not good for health.

Many food companies have faced severe actions for not disclosing their exact contents. For instance, there are companies which got punished for mixing milk or its derivatives in its products without disclosing the ingredients. Milk is an allergen and authorities in the US are very conscious about even the minutest of differences in what is disclosed and what is done by food companies.

Literally, food industry in India too should be supervised in the manner pharma companies are. After Maggi controversy, it is expected that the government will take necessary actions and develop a framework to rule out such anomalies in a systematic manner.

The case in point is that an ad-hoc action against Nestle is not the end but a beginning of new regulatory structure which effectively governs food and beverages companies. After Maggie, we do not even know what are we consuming and what all it has? This is extremely serious and governments must swing into action fast.

Meanwhile, food and beverages companies are seeking all the ways to cover their risks and control their liabilities towards product recall. Insurance companies have all the opportunity to leverage this incident and develop an all new market.

(Contributed by Naval Goel, Founder & CEO,

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