With the manufacturing sector experiencing strong growth and exports exceeding NZ$49 billion, the industry is in good shape. However, with the global trend for increased innovation and efficiency, new challenges and risks face the industry in relation to quality control.

For Delta Insurance, this trend highlights the need for manufacturing companies to continually assess and minimise these increasing and evolving risks and they have developed what they believe to be a New Zealand-first – liability coverage specific for the needs of manufacturing companies, giving them comprehensive cover for risks such as product defects and related financial losses.

Senior underwriter and casualty lines manager Dinesh Murali elaborates: “events such as product recalls or pollution incidents, can be prohibitively expensive and seriously impact a manufacturer’s bottom line.”

The manufacturer’s liability package takes a modular approach and carries some unique coverage sections which are usually not addressed in such policies. “It can be a tedious and expensive exercise for typical SME businesses when they need to purchase several insurance products independently” says Mr. Murali.

“Multiple insurance covers usually make the cost prohibitive. We have put everything under one package at a more affordable premium.”

According to Mr. Murali, the cover addresses the risk of product recall and product defects unique to the manufacturing sector, as well as cover for financial loss, slow and gradual pollution, crisis management and consequential loss. It can also be packaged with other cover such as cyber liability.

With a 62% increase in recall rates for food products last year and a trend that looks set to continue, manufacturers need to ensure they are covered for such an event. Delta’s policy covers a range of scenarios that result in a product recall, including accidental contamination from pathogens, undeclared allergens and other foreign matter, malicious product tamper and incorrect labelling.

Additionally, non-food manufacturers are also covered for a product recall scenario, given the range of new and evolving risks they are confronted with today. Kiwi manufacturers are increasingly vulnerable to possible quality control issues given their reliance on overseas suppliers (for outsourced components or manufacturing processes).

They are also exposed to increased risk of cyber-attacks through widescale use of programmable logic controller software, embedded technology connecting to the ‘internet of things’ and general advancement of Industry 4.0 technologies.

In addition to product loss and product recall costs like advertising and shipping, there can also be other costs involved including damage investigations, sample testing, advice from experts, business interruption and loss of sales and customers. “There is also the danger of significant reputational damage if companies do not have the resources to manage these critical issues. We can help to provide all the legal, PR and other expertise when things go pear-shaped” says Murali.

As the only locally owned and operated specialist liability underwriting agency in New Zealand, this strategy has been successful for Delta with other products.

They are currently the largest insurance provider to the thriving kiwi technology sector and have introduced the first local liability products in New Zealand for the environmental and UAV (or drone) industries.

“We are similar to the New Zealand manufacturing industry in the sense that we don’t want to be all things to all people.” says Mr. Murali. “We’ve sought out niche markets where we believe we can truly add value by providing tailored, high quality products.”

Mr. Murali concludes: “Manufacturers need to get the puzzle right and minimise their risk while achieving growth. They make hundreds of good decisions every day. They just need to make sure they are equipped to deal with the one decision that doesn’t come off!”

Delta Insurance is a New Zealand-based insurance provider, a Lloyd’s of London Coverholder and are backed by multinational insurer Allied World. They provide a range of specialty commercial insurance products and have an office in Singapore.