Damage Control: Mitigating the Results of Increasing Product Liability Insurance Rates

It was inevitable.

The product liability insurance rates for supplement industry have been in steep decline for approximately seven years. They have topped out in the past ninety days and will almost certainly rise in the near future.

Why? Some estimates show that rates have fallen by as much as 80%. They could not fall without an end. Insurance companies have suffered from catastrophic losses and a more litigious society. The interest rates are at an all-time low and there is no sign of a slowing down. Premiums for commercial insurance have a history of ebb-flowing, rollercoaster effects and are expected to continue rising.

There are a few practical things you can do to increase your chances of surviving the insurance seller’s market and stay there for the next buyer market.

These are some suggestions.

Do not delay until the last moment

Your broker should be contacted at least 90 days in advance of the renewal date to discuss your renewal. Your business will be more important to underwriters than it was last year. It will take longer because the process is more complex.

Take into account coverage- in addition to price

It is important to understand your coverage. This goes beyond product liability insurance rates, which is the most expensive policy that supplement companies purchase. Is your current coverage covering the most important risks? Are there areas in which you are exposed but not covered? You should review your policies or, better yet, meet with an insurance professional to conduct a thorough review of your coverage. You should be prepared, because insurance companies will try to lower coverage by adding exclusions or endorsements that are not compatible with the product you purchased.

For higher premiums, prepare management

Surprises are not something that anyone likes. Managers at the mid-level of larger companies should prepare their bosses for higher rates. As deductibles may rise and liability insurance may no longer be affordable, insurance buyers need to communicate with senior management about their tolerances.

Step into your Underwriters Shoes

Imagine yourself as the product liability insurance underwriter for your company. How can you respond to these questions and what questions would they ask? Did you receive a 483 warning notice this year? It’s online and your underwriter can find it. Do you have an explanation? Do you have a certificate of insurance program that you manage for your suppliers? Is there anything on your website that could scare off an underwriter? This is especially important for sports nutrition companies. Are you an over-sold carrier?

Are you willing to share your story and provide supporting documents if you are asked?

Find a broker who specializes in your industry and team up

Did you ever think, “My broker doesn’t understand what we do?” It should be a priority to find a broker that understands the supplement industry. They will be a strong advocate for your insurance interests. The underwriter will still place your product in the dietary supplement market, regardless of whether you are supplying raw material or finished product. There are still some scammers out there. You will pay for this association and a skilled broker will be able to distinguish you from the rest.

Many insurance buyers don’t know that every insurer offering product liability for the dietary supplement industry requires the use of wholesale brokers to obtain them. The broker you choose (hereafter referred to as the “retail broker”) must give your account to a wholesale brokerage, who will then submit it to viable insurers. Many people believe that the retail broker talks directly to the underwriters. This is false. The introduction of another party to the buying chain increases the risk of something “falling between cracks” in the insurance procurement process. It is crucial that companies choose a knowledgeable and competent retail broker to help them market their insurance.

Make sure you carefully choose your broker and don’t leave it until the last minute.