Insurance Policy

Managing a food company means balancing a lot of moving parts in addition to the main activity of processing food — complying with regulations, adopting automation, improving sales, hiring qualified employees, and everything in between. In the daily hustle and bustle, it can be easy to lose sight of things that operate in the background, like insurance.

Insurance is something businesses count on to be there for them when something goes wrong. No one wants to discover that their coverage is inadequate in the midst of a devastating recall or property fire. To learn more about what food processors should look for when compiling a comprehensive insurance plan, we spoke with Cole Williams of Insurance Associates, Inc.

Williams is a Risk Advisor, working exclusively with food processing plants. His grandfather started Insurance Associates back in the late 1960s, and the business is now owned by his parents, Scott and Lori Williams.

Insurance Associates began working in the food processing industry when Williams’ grandfather realized that not enough coverage options were available to meet the specialized insurance needs of local butcher shops. “They have a lot of the same concerns as any small business does,” Williams says. “It just gets compounded because they're also working to produce safe, quality food.”

Unique challenges require unique insurance solutions

Williams points to three primary concerns currently affecting food processors and, consequently, their insurance plans — regulatory compliance, product recalls, and workforce availability.

  • Regulatory compliance: Operating a business while keeping up with FDA, USDA, and OSHA regulations has its challenges. Williams notes that OSHA’s local emphasis programs, which are designed to address workplace safety risks on a regional level, can be particularly difficult to adhere to.
  • Product recalls: Recalls are costly, and not just financially. The resulting negative media attention can severely damage a company’s reputation and cause customers to lose trust in the brand. Whether it’s the result of labeling errors or contamination, no company wants to incur the direct and indirect costs of a recall.
  • Workforce availability: We’ve heard from other companies featured in this series about the struggle to find proficient employees and encourage younger generations to enter the industry. Williams adds that historically low unemployment rates are “pushing wages higher, which causes strain on balance sheets and prevents companies from investing in new products and materials.” This means they’ll be looking for insurance policies that don’t break the bank.

For these reasons, identifying the right insurance for food processing plants is complicated. Companies can benefit from having an agent who’s familiar with these challenges.

The consequences of cutting coverage corners

Because insurance is challenging, many food processors end up with inadequate coverage, or less coverage than they thought they were getting.

Williams cautions against assuming everything is covered. “Insurance isn’t one of those things you want to test,” he says. “You don’t want to see if it’s going to work or not.” That’s why it’s important to be thorough and discuss the details of what’s covered in every possible situation. “That's why you need an agent, like us, who has been in the business and has seen it all before to say, ‘Well, we learned that lesson five years ago, and here's how we solved that.’”

Experienced agents can point out coverage gaps that could spell trouble down the road. They can work with customers to develop a comprehensive plan that minimizes the loss if something should happen. “We take this very seriously,” Williams says. “We look at ourselves as partners in whatever mission that you're on. As a food processor, you're making a warranty to the public that your product is safe. And we're the ones standing behind you writing the check if it isn't.”

A closer look at coverages food processors should consider

Product recall coverage

The possibility of a product recall is a looming fear in the food industry. And for good reason. Recalls are expensive to resolve upfront, but indirect costs like sales loss and legal fees linger long after.

The food industry is a large portion of the economy, and as such, food-related startups, organizations, and media outlets have their eyes fixed on the latest recall announcements.

“Once a recall becomes public and there's media attention applied to it, there are a lot of expenses that these food companies just have to eat because they don't have adequate coverage for it,” Williams explains.

He says companies often assume they have coverage for recalls within general plans. But most general liability policies omit product recall coverage under a “Work Products/Product Recall” exclusion. Product recall coverage is readily available, but getting it requires companies to look beyond basic insurance plans.

To fully prepare for possible contamination and recall situations, it’s important to seek both first- and third-party coverage. First-party recall insurance covers the purchaser’s business in the event of a recall. But Williams says the best recall policies also cover third parties. For example, if the company produces a raw product that becomes an ingredient in another company’s product, “now there's a third party, because the other company is going to have to recall it as well and they're going to incur expenses.”

Business income coverage

Business income insurance is another coverage area that’s often neglected. “Business income coverage pays for the loss of income you sustain while you're out of operation,” Williams explains.

And that type of loss is not unlikely. “In the last three months or so, four or five meat plants suffered total loss fires,” Williams notes. A whole business going up into flames is frightening, and it’s certainly not the time business owners want to find out they don’t have adequate coverage. Business income insurance can help keep the company afloat during the time-consuming recovery and rebuilding process.

Property coverage

“Of course, this all assumes that they have enough property coverage to begin with,” Williams adds. While it’s important for food companies to purchase recall and business income insurance, he cautions against overlooking their property limits in the process.

To help companies get the coverage they need, Insurance Associates makes sure to go back to those standard policies and carefully review details like inventory size and property value. These are things Williams says “beginning agents learn how to do, but as they grow and start working with bigger companies, they oftentimes forget about. And unfortunately, that's the thing that's going to put somebody out of business.”

The three-step insurance matching process

Navigating insurance options can be daunting without a good agent to lead the way. For this reason, Insurance Associates abides by a three-step process that keeps the focus on customer problem-solving, not commissions and premiums:

  1. Initial meeting: The first meeting focuses on gathering basic information and discussing coverage needs. Williams says food companies should be wary of agents who immediately send out applications to every possible carrier. These agents may come back with an overwhelming number of insurance options and be unable to provide guidance as to which carrier is the best choice. “For instance,” Williams explains, “not every carrier wants to write a slaughter operation. And not every carrier wants to write a grower/packer/shipper.” The right agent will already have a good idea of which carriers are best for each operation.
  2. Linking customers to carriers: While some agents bring the marketplace to the customers, Insurance Associates prefers to bring the customers to the marketplace. This way, those customers can share what’s unique about their work and directly communicate their needs and challenges with the carrier. “If you're a federally-regulated meat or food processor, the hoops that you're jumping through on a day-to-day basis are tremendous and expensive,” Williams says. “We find that a lot of times, a food processor's best asset is its own story. And it's very rare that the carriers actually hear what that story is.”
  3. Providing ongoing, quality coverage: The work doesn’t end once all the documents are signed. Even with “superior rates and excellent coverage” right out of the gate, there’s always room for improvement. That’s why Williams sets up a calendar with each customer to continue to check in and address any issues that might come up as time goes on. “It’s about delivering consistent and predictable results to your company, my company, and the carrier.”

This year will mark Insurance Associates’ first time exhibiting at PROCESS EXPO. They’re already a member of a handful of state meat processing associations, as well as the American Association of Meat Processors, and they felt that getting in front of the audience at PROCESS EXPO was the next best step in continuing to grow and connect with larger companies. “A few of my customers go to it and they said it's a good show,” Williams says. “It was a natural evolution for us.”

For more information on risk management and insurance coverage specifically for the food industry, visit Insurance Associates at Booth #3868 at PROCESS EXPO.