This article I wrote appeared recently in Post magazine the work we are doing in the Vaping sector.
Meeting the insurance needs for the Vaping sector is a challenge that some brokers are addressing head on. The reality is that few insurers are rushing towards brokers to meet customer needs. Why is that? Most insurers talk of uncertainty and lack of legacy data as a reason to avoid underwriting the sector and brokers do well to search out those that wish to be involved. Insurers are also concerned around the regulatory environment and the consistency the sector has in adopting standards for safety and quality. MGA’s and insurers rolling over portfolio transfers pose a different problem. In an immature market it would be common to see insurers inadvertently covering vaping businesses only to discover what they have and then withdrawing capacity.
A technological gap in route to market could be an issue. There are plenty of platforms available and yet finding something as simple as a drop down code for Vaping Shop – one of the fastest growing areas of the UK economy, is fraught with frustration. It’s not really a question of being big or small and in my view there are too many insurers who lack the organisational structure, ideas and ambition to have the ability to respond with any speed to emerging markets.
In simple terms a manufacturer/distributor has more to think about than a retailer. Manufacturers have a more direct responsibility than retailers for the safety of their product. The real and obvious problem is the products themselves. The clear and present danger are claims likely to come from the device causing a fire and consequent injury or property damage; or alleged injury from the use of the product which may raise numerous issues as to causation. Inevitably, the exclusions and ambit of cover will need to be carefully considered. Product Recall insurance may be available and could be a consideration for manufacturers and they should look at contamination and defect product wordings carefully.
There are tangible and obvious risks that provide few problems. Manufacturers/distributors and retailers need to insure physical things such as Buildings, Contents and Stock against loss. Our experience suggests this is ground covered well. Less well covered is:
• Accuracy of trade description to insurers – vaping owners get very upset to be called Tobacconists
• Clarity around security and alarm standards needed by insurers
• Levels of business interruption covers (including customer /suppliers extensions)
• Lack of Directors & Officers liability cover and failure to understand exposure to regulatory misconduct or breach of duty
• Some restrictions in product liability cover and understanding of wordings
• Fidelity risk from staff / workers
• Cybercrime – understanding of theft of electronic funds/ data/ damage to networks
The longer term problem is the unknown exposures of the products themselves. The Vaping sector is in need of widespread commitment from insurers to ensure legal liability cover in place is on a claims occurring basis. Right now covers are mostly on a claims made basis, typically with a nicotine exclusion. Sadly for some, there is no Products cover at all. Manufacturers and retailers will be the targets for any future regulatory and liability litigation action but also exposure associated with indoor air quality could bring restaurants, workplaces and other public places into focus.