Alternative proteins including cell-based cultured proteins and nutraceuticals are just some of the Foodtech trends right now. This is an exciting time as technology is used to provide more sustainable sources of food.
As a Foodtech entrepreneur, there is lots occupying your mind. From the development of the products, navigating the regulatory landscape, or the go-to-market strategy. And once the products are launched, there is another set of priorities to focus on. Here is a list of some key risks and insurance policies applicable to Foodtech companies designed to protect the balance sheet to ensure you can focus on growth and scale.
There are four key stakeholders or assets that you will want to protect, and four types of insurance policies that address their risks.
1. Consumers / Clients through Product Liability insurance
2. Employees through Workers’ Compensation insurance
3. Equipment / Physical Assets through Property All Risk insurance
4. Directors / Company Management through Directors & Officers insurance
Product Liability Insurance
Most Foodtech companies are developing new exciting food products that are to be consumed by the public. There is a risk of someone getting hurt from consuming the product due to either a design or manufacturing defect, or because of a mistake in the labelling. Think you are off the hook because your company doesn’t actually manufacture the product? Think again. This risk does not only apply to product manufacturers. Retailers, resellers and wholesalers may receive claims against them. If your brand is on the packaging of an alternative protein or other food, you are going to be the party that gets the lawsuit first.
Product liability insurance covers the legal defence and settlement costs from the lawsuits. It is a very important policy to protect your balance sheet. Essential to have if you are launching products in litigious markets such as the US or Australia. Moreover, you might be required by your retailers or distributors to take out this policy. More on this here.
Workers’ Compensation Insurance
As in any industry, your employees are the backbone of the company. However more likely than not, Foodtech staff will have more ‘hands on’ job profiles than other tech companies due to the nature of the job of either being in a lab for R&D, or in a warehouse etc. It is the employer’s duty of care to provide a safe working environment to their employees. However accidents do happen. And for this there is Workers’ Compensation insurance. In Singapore, it is part of the Work Injury Compensation Act (WICA) which is legislated by the Ministry of Manpower (MOM) for all staff earning up to S$2,600 a month, or all staff with a manual job nature. This insurance covers the medical fees for injuries or even diseases sustained at the workplace, as well as provides cover for medical leave wages. As this is a mandated insurance policy, it is one that you should not forget about.
Property All Risk Insurance
Technology is at the heart of Foodtech businesses. For a lot of companies, this will mean reliance on certain machinery or equipment to manufacture or cultivate their products. As they are integral to the business, if they get damaged or stolen from the premises, this will have serious impact on the ability of the company to continue business for a period of time. Not to mention the out of pocket expenses to replace or fix them. This is also the case for stocks in trade that get damaged or stolen in storage.
You can take out a Property All Risk policy to cover your company’s valuable physical items from ‘all risks’, i.e. from any peril that causes a physical damage to them. Note that general wear and tear of items is clearly not covered under insurance. What can also be added on to a Property All Risk policy is Business Interruption cover. This provides protection in case your business is brought to a standstill because of an All Risk claim, e.g. if there is an explosion in your warehouse and you can no longer dispatch your products to your distributors, Business Interruption can provide compensation for the loss of revenue sustained.
Directors & Officers (D&O) Insurance
Foodtech companies will most likely have to raise funds from investors. Some of the investors may take a board seat on the company as they want to direct more control for growth and development. There is more responsibility on company directors, and more risks come with this too. The personal assets of directors are at risk if they are personally named in lawsuits or company investigations.
D&O insurance covers the legal defence and settlement costs for ‘wrongful acts’ committed by the directors and management of the company. This includes claims for employment practice, occupational health and safety and breach of duty and trust. When you are pushing the boundaries in new technologies in food, you want to have the protection of insurance in case of slip ups. Moreover, having this policy in place proactively can be a way to attract investors and leaders to your organisation. More on this in our previous blog post.
Get in touch with us if you want to discuss the risks specific to your Foodtech company and how insurance can help safeguard your business.
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