Lifting the lid on Delta’s new product recall offering | Insurance Business Australia
Lifting the lid on Delta’s new product recall offering
Agency says i’t’s the first product of its kind
Delta Insurance, a New Zealand born underwriting agency, recently launched an SME focused product recall offering in Australia. Oliver Gilmore (pictured above), the agency’s Brisbane-based casualty underwriter said educating their sales channel: brokers, about the relative affordability of this novel offering will be key to its success.
“A key challenge is breaking down that perception about recall that it is too expensive and quite a hard or lengthy application process,” he said.
Gilmore said the “general feeling” about traditional product recall offerings in the market is that premiums start at between $5,000 and $10,000 and involve a 10-page proposal.
Delta’s version for a small risk, he said, is a three-page proposal and there are no minimum premiums. Cover starts, he said, at $300 a year.
Educating brokers is key
“We go out there and start talking to brokers about recall and they are half listening but not really listening because they don’t think it’s something that’s going to apply to them,” said Gilmore. “Once you drop in those kind of prices, they realise it is something that’s actually accessible to their insured.”
Then brokers are engaged and start to ask questions, he said.
“We’re starting to see a lot more inquiries – so we are starting to breakdown those perceptions, which is really positive,” said Gilmore.
Insurance for the supply chain
He said their insurance can cover anyone in the supply chain, not just manufacturers, and is two separate offerings.
“The consumable products, that’s our food coverage,” said Gilmore. “Then the consumer goods and component parts is basically non-food.”
He said the triggers for each offering are slightly different.
“For example, with food, the trigger is a manufacturing risk relating to an error in the supply chain, processing, production or distribution,” said Gilmore. “Then on the components and consumable goods side, so physical products, the triggers can be design errors or supply chain errors and then the manufacturing error too.”
A first: NZ firm chooses Aus over the homeland?
Gilmore’s firm is headquartered in New Zealand and only launched an operation in Australia last year. However, their product recall offering is so far only available in Australia. Insurance Business asked why a NZ firm would choose to launch in Aus over the homeland?
“Delta Australia has different Lloyd’s capacity than Delta NZ,” he said. “One of our capacity providers, Beazley, came to us and said they have a product recall offering that’s been very successful and were looking to bring it out in Australia and wanted us to take the lead.”
Gilmore said his firm was pleased to “have that tap on the shoulder and be selected” to bring this product to market.
Gilmore said there’s not a lot of data on claims but from his own industry observations there was a clear gap in the market for the sort of coverage they are offering SMEs. He also pointed to the frequent media coverage of product recalls, particularly in the food sector.
“There’s obviously a huge exposure for these SMEs because they’ve still got the recall exposure but they can’t afford the coverage to protect themselves. So that was the first gap that we found.”
Contractual requirements inspired the new covers
However, the main driver behind designing coverage of this kind, he said, was new contractual requirements for SMEs in the supply chain.
“For example, a lot of growers who are supplying Coles, as part of their contract they’re now required to have a product recall policy,” he said. “Obviously if they had to go out and take a five grand minimum, they’d have to build that into their contracts and that makes them uncompetitive.”
He said their product recall policies are like catastrophe covers: a firm may never make a claim but when they do it’s for damage costs than can be very significant.
An NZ firm in OZ
When Delta launched in Australia early last year, founder and director Stephen Carey said his firm would focus on professional services, technology, healthcare and the manufacturing and food and beverage sectors.
The firm also has a presence in Asia where it became the first Lloyd’s coverholder in Singapore. Delta also provides specialist underwriting to clients in Hong Kong, Taiwan, Malaysia, Thailand, Vietnam and Indonesia.
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