US product recall insurers brace for post-Covid-19 claims surge
Once the US government has brought the pandemic sufficiently under control to enable site inspections, there is expected to be an escalation in food product recalls.
Joe Biden’s election as US president could have a big effect on the country's product recall insurance market. Although he already has a very full to-do list, Biden has previously shown strong concerns about food safety, so the next four years could see a further shake-up of the US food industry, which is already stressed as a result of the pandemic.
Biden’s immediate focus is on tackling the COVID-19 crisis. His first priority is to rapidly expand the country’s vaccination programme begun under the previous president Donald Trump. That is good news for the food industry, which has been particularly hard hit by the virus, with a string of outbreaks centred on areas with large food processing plants. Many key workers involved in producing and selling food have priority status so will now be towards the front of the vaccination queue.
The pandemic, which has already claimed the lives of 400,000 Americans, is likely to raise wider questions about the eating habits of a nation in which 50% of all adults are expected to be obese within 10 years.
The pandemic, which has already claimed the lives of 400,000 Americans, is likely to raise wider questions about the eating habits of a nation in which 50% of all adults are expected to be obese within 10 years, according to a 2019 scientific study published in the New England Journal of Medicine; and where one in three have prediabetes, according to the Centers for Disease Control. That could shine a spotlight on what exactly goes into the food and drink that Americans consume.
Food safety
Biden was Vice President in the Obama administration, which showed a particular interest in food safety. Biden chaired a taskforce that proposed sweeping changes in food standards, which resulted in 2011’s landmark Food Safety Modernization Act (FSMA).
Biden chaired a taskforce that proposed sweeping changes in food standards, which resulted in 2011’s landmark Food Safety Modernization Act (FSMA).
The law seeks to prevent, rather than react to, food safety problems by introducing a system of production and import regulations and controls to which food companies must comply, enforced through regular on-site inspections, as well as enhanced co-operation between government agencies
FSMA brought about a risk management sea change in the food and drink industry. Many smaller suppliers and family-run businesses had to adjust to the extra regulation and preventative measures. It took a lot of catching up, as compliance required more than just rewriting manuals and retraining staff; for many firms it meant spending a lot of extra money updating – or even adding – a layer of quality management, and, in some cases, even rethinking their entire corporate culture.
It is therefore fair to assume the Biden administration will renew the federal government’s concern with food health and safety at a time when people’s health is a national issue. The government could choose to target healthier eating in the shadow of a deadly virus that preys heavily on those with pre-existing health conditions resulting from bad diets.
The Dietary Guidelines for Americans 2020-2025, published at the end of last year, for the first time provide comprehensive guidance on healthy eating for everyone from newborn babies to centenarians, so proposed changes in the nutrient content claims and labelling of food products may come under the spotlight.
The plant-based eating trend, which has taken the food market by storm, is also likely to continue, putting greater emphasis on food watchdogs to understand and control what exactly goes into these foods. The US Food and Drug Administration’s (FDA) work on defining and establishing labelling for innovative alternative proteins is likely to garner more attention.
Food recalls
Renewed attention on food standards could see the FDA and the US Department of Agriculture’s (USDA) recent decline in manpower and funding being reversed.
That’s not to say Trump was relaxed about food safety. We did not see a drop in the number of food recalls during his time in office. There were 1,402 food and beverage recalls between 2017 and 2020, according to FDA and USDA data. The number jumped in 2020, to 404 from 348 the year before, but, crucially, the quarterly number steadily declined as the year wore on.
There were 1,402 food and beverage recalls between 2017 and 2020, according to FDA and USDA data.
This fall can mostly be explained, I think, by the COVID-19 crisis: the urgency to get food onto supermarket shelves to tackle shortages and a reduction in testing and auditing at food production sites due to lockdowns and staff shortages. The pandemic has meant “there has been a level of accepted leniency in regulatory enforcement,” in recent months, Control Risks, Hiscox’s crisis management partner, says. Simply put, the less you look for things, the less chance you have of finding them. The longer COVID-19 restrictions continue, the more problems are likely to be stored up.
Once the US government has brought the pandemic sufficiently under control to enable site inspections to resume – both by companies’ own quality control teams and federal agency officials – there is a likelihood of an increase in food recalls. That will inevitably lead to more insurance claims, in my opinion. But that is what we are here for: to support our customers which have worked so hard to feed a nation under extraordinary pressure.
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This article was first published by the Insurance Day on 2nd February 2021: https://insuranceday.maritimeintelligence.informa.com/ID1135591/Viewpoint-US-product-recall-insurers-brace-for-post-Covid-19-claims-surge
