Food safety liability insurance is widely praised but poorly subscribed, and needs market preconditions

After the media exposed on July 20 that Shanghai Husi sold “expired meat,” an incident involving McDonald's, KFC and several other chain restaurant companies, on July 28 the media again exposed that the Changping branch of the Hanlixuan barbecue supermarket had various problems including “saliva meat” flowing back to the table. The endless stream of food safety incidents has once again sounded the food safety alarm.

Compared with the food safety incidents that have occurred frequently in recent years, food safety liability insurance (abbreviated as “food liability insurance”), which is regarded as safeguarding “food safety on the tip of the tongue,” combines compensation with an ex ante third-party safety supervision role, yet it has long been in the awkward position of being “widely praised but poorly subscribed.”

⟦NL> In fact, as early as 2013, the State Council Office issued the Food Safety Law of the People's Republic of China (Revised Draft for Review) for public comment, mentioning for the first time the establishment of a compulsory food safety liability insurance system. The recent frequent food safety incidents have revived calls within the industry for the compulsory food liability safety insurance to be implemented as soon as possible. However, some industry insiders also say that, apart from legislative support, compulsory food safety liability insurance still requires certain market preconditions.

Food liability insurance claims require proof of “not knowing”

On July 28, the Changping District Food and Drug Administration of Beijing inspected the Changping branch of the Hanlixuan barbecue supermarket, which had been exposed for “saliva meat” flowing back to the table, and found various problems such as incomplete or expired food labels, and ordered it to suspend business for rectification.

Before that, the meat supplier Shanghai Husi Food Co., Ltd. (abbreviated as “Shanghai Husi”) was exposed on July 20 for extensively using expired meat raw materials. That evening, the Shanghai food and drug regulatory authorities sealed up the Shanghai Husi involved overnight and ordered downstream companies to immediately seal up food raw materials from the company. McDonald's, KFC, Pizza Hut and several other “foreign fast food” companies were implicated.

The frequently exposed food safety incidents have once again drawn people's attention to food-related “food safety liability insurance” (abbreviated as “food liability insurance”).

It is understood that food liability insurance means that when the insured produces or sells food within its business premises, or provides food on site that matches the nature of its business, and causes personal or property loss to consumers due to negligence or fault, the insurance company bears the economic compensation liability.

Simply put, if a company insures food liability insurance and a consumer becomes ill after eating the company's food, then after the company advances the consumer's medical expenses, the insurance company will compensate the company according to the policy terms. The compensation limit is determined according to the company's insurance needs, and the premium rate is generally determined comprehensively based on factors such as the coverage amount, business scale, business type and number of premises.

Whether it is Hanlixuan, Shanghai Husi, or restaurant companies such as KFC and McDonald's, all are food-related companies. So do they all fall within the coverage of food liability insurance?

In this regard, Hao Yansu, dean of the School of Insurance at the Central University of Finance and Economics, said that strictly speaking, Shanghai Husi's products are not aimed directly at consumers, but provide raw materials, and the products are sold to consumers through merchants such as McDonald's and KFC. Therefore, Shanghai Husi does not fall within the coverage of food liability insurance.

However, regarding the several companies implicated this time, such as McDonald's and KFC, Hao Yansu said that if these companies knew that Husi's products had problems, that would constitute “knowingly selling what is wrong,” and in such a case, the insurance company would be exempt from compensation for harm caused to consumers; if there is evidence proving that they did not know, then if these companies had insured food liability insurance and a consumer reported the matter, the companies could obtain compensation from the insurance company. After paying the claim, the insurance company could seek recovery from Shanghai Husi.

“To avoid encouraging deliberate conduct by insured restaurant companies, the deliberate acts of the company and its representatives are usually designated as excluded liabilities under the insurance contract. In such a case, consumers' losses are borne by the company itself.” a person in the liability insurance field said.

Food liability insurance is “widely praised but poorly subscribed”

In addition to providing rapid relief and economic compensation to consumers harmed by food safety problems, a person from Chang'an Liability Insurance Company said that the greater role of food liability insurance is also reflected in participating in social management. Through claims under food liability insurance, a large amount of data can be accumulated, and by analyzing the causes, effective risk points for preventing food safety accidents can be identified, helping various food industries improve food safety management and avoid risks.

However, although food liability insurance has many benefits, domestic food and restaurant companies generally have a low awareness of it, and this type of insurance has long been in the awkward position of being “widely praised but poorly subscribed.”

Public reports show that abroad, the insurance rate for food safety insurance exceeds 50%. Some developed countries and regions long ago legislated to make food safety insurance compulsory. For example, some states in the United States established a compulsory food safety liability insurance system through legislation, making the purchase of insurance a precondition for the production and business activities of food companies. In China, however, food liability insurance has always been a commercial act of voluntary choice between food companies and insurance companies.

In China, more than a dozen Chinese and foreign insurance companies, including PICC, CPIC, Allianz and Chartis, have launched many food-related insurance products, including food safety liability insurance, comprehensive food contamination insurance and comprehensive restaurant insurance. Among them, PICC Property and Casualty has carried out food product liability insurance business since the 1990s. But the insurance rate is not high. Incomplete statistics show that the domestic insurance rate for food liability insurance is still less than 1%, with annual premium income of less than 100 million yuan, and most of the insured are food export companies.

As China's first professional liability insurance company, as of July this year, Chang'an Liability Insurance had 12 second-level institutions opened and operating, all of which have carried out food liability insurance business, cooperating with Beijing Qingfeng Steamed Bun Shop, the Xiang'e Qing Group, and many catering service units in Fuyang and Lin'an in Zhejiang. However, the above-mentioned person from Chang'an Liability Insurance also pointed out that the effect during the promotion of food liability insurance has not been significant.