Food Safety Insurance - Funding consumer confidence

What if food safety liability insurance policies were mandatory for the entire fresh produce supply chain? The premise is this: If firms do not have evidence of a adequate food safety plan in place and have auditors visiting their operations , the insurance premiums they would pay (ostensibly to a government authority) would be put at such prohibitive levels that it would preclude their operation from competing with companies who pay attention to food safety. Additionally, if food companies have technically advanced traceability systems in place, the insurance premium would be that much less. Commodities with less record of food safety problems could receive discounted rates.Parameters could be created which would exclude the insurance requirement for small growers who supply local markets.

Of course, food safety insurance would be necessary in the event of a foodborne illness outbreak that implicates fruits or vegetables from a particular company. Ideally, the insurance program would compensate victims on based on a standardized table according to the severity of their suffering.

As I see it, the insurance program could be run by the government and perhaps linked to fees the FDA would charge for enhanced food safety oversight. Alternatively, the fee could be attached to the PACA license fee as a condition of shipping produce across state lines. Operators who are part of the insurance program and have acceptable food safety plans would have the right to refuse redundant buyer imposed audits.

Given the weakening economy, it is important to "build in" the cost of food safety into the baseline of industry operations. Otherwise, what is to prevent strugging companies from cutting and/or diverting resources once devoted to food safety?

The thought of insurance may not particularly new. But it strikes me as a way to encourage the supply chain to "do the right thing" in implementing food safety measures.

Find a a link to an abstract about product liability insurance and food safety here. From the absract:

Havinga, Tetty. and Wiegman, Ida. "Product Liability, Insurance, and the Private Regulation of Food Safety" Paper presented at the annual meeting of the The Law and Society Association, TBA, Berlin, Germany, Jul 25, 2007

In food safety regulation, as in other domains of regulation, the traditional command-and-control form of regulation has been criticized. In food economics literature three factors are distinguished that simultaneously encourage food firms to adopt food safety measures: market forces, food safety laws and regulations, and product liability laws. In this paper we will explore the influence of product liability on food safety measures within firms. Product liability is thought to have potential impact on how food firms manage food safety and food hygiene. Liability law may influences preferences and costs of firms directly, inducing businesses to take measures to prevent liability claims. The influence of product liability on business risk management may also be more indirectly, through liability insurance. Insurance companies may induce food safety controls (through the terms of insurance policy or by calibrating premiums according to the level of precautions taken). However, insurance could also limit the economic incentives for firms to produce safe food. The extent to which liability law and insurance does play a role in promoting food safety and food hygiene is unknown.