bacteriaThe rate of food recalls has been high partly because of the Food Safety Modernization Act (FSMA) of 2011. Following the implementation of the act, FDA has increased food facility inspection frequency. The FDA has also been given the power to access the food companies’ food safety plans and records. The aim of doing inspections frequently is to make sure that the food supply in the United States is safe. The focus has changed from reacting to food contamination to preventing contamination.

When a product is recalled, a company incurs a huge loss, from both reputational and financial perspectives. This means that companies should buy product recall insurance to make sure that they are compensated. According to insurers, lack of product recall coverage is more like a death sentence to product manufacturers. Typically, product recall coverage comprises of all costs linked to product recalls. This ranges from removing products from shelves and replacing them, to crisis management services to take care of the fallout caused by the recall. Third party coverage is also included in some policies. The role of third party coverage is reimbursing the costs incurred by a third party following a product recall. It is also essential to note that product recall coverage would give manufacturers risk management programs to help in implementation of protective controls that are effective.

Manufacturers also need contamination coverage for cases of mislabeling or contamination of a product. Despite the increased rate of product recalls, insurers have noted that the demand for recall coverage is still low. This is because manufacturers still consider the coverage as a luxury. However, with the increased rates of recalls and the huge losses incurred thereafter, it is evident that having recall coverage is important.