5 Hard-to-Insure Risks for Grocery Retailers

KANSAS CITY, Mo., May 6, 2015 /PRNewswire/ -- Grocery retailers traditionally face a multitude of risks that are not covered by typical insurance programs, according to a new whitepaper report from Lockton, the world's largest privately held, independent insurance broker.

The report—titled Insuring the Operational Risks of Grocers with Intangible Risk Insurance—examines the perils grocery retailers face that are not covered by conventional Property, Crime and Cyber insurance programs.

Co-authored by Emily Freeman, Lockton Risk Management Specialist, and Lisa McAleenan, Lockton Senior Vice President–Financial Services, the report offers expertise on working with a broker and underwriter to customize solutions that address such exposures as:

1. Reputational Harm: This type of coverage responds to brand damage (as a result of adverse social and traditional media attention), which causes loss of business. This could include security and privacy breaches, food safety concerns, allegations about legal compliance, workplace violence, and a disruption in critical computer systems.
    
2. Regulatory Shutdown/Intervention: As major grocery chains are increasingly relying on independent, third-party certifiers to ensure product safety, this is an increasingly important risk peril. Though many chains now have safeguards in place (e.g. vendor certification), government inspectors still have the power to potentially shut down individual store(s) for health and safety concerns.
    
3. Supply Chain Risk: Risks related to natural or man-made disasters, contagious disease, terrorist activity, and war could disrupt the flow of products and the ability of customers to travel, which may adversely affect revenues. Essential suppliers may not be able to deliver products on time, which could hinder a grocer's ability to operate.
    
4. Direct and Contingent Network Risk: This type of insurance indemnifies a grocery retailer against computer network disruption that impairs its system or any third-party systems it depends on to conduct business—specifically disruptions that result in a net profit loss. Perils covered include computer attacks, cyber terrorism, malicious damage, and administrative or operational mistakes.
    
5. Intellectual Property Infringement: Some grocers have purchased companies whose real worth is associated with intellectual property (particularly patents developed software for customer internet services). If the acquiring company becomes the target of an intellectual property lawsuit after the purchase, it may not be able to sell or use the products that that are named in the injunction.

To help mitigate these risks, the report authors recommend that grocers consult with their insurance brokers and underwriters to tailor or expand policies that address these types of intangible risks. Once the risks are identified, policies may be "stress-tested" with relevant scenarios to provide additional confidence to the potential insured.

"While grocers are not required to purchase more coverage than is relevant to their traditional risk profiles, these perils can impair or disrupt their own systems or those systems they depend upon," explained Freeman.  "Consulting with a broker and underwriter to review claims and settlement history is a key first step in crafting a policy that addresses unique needs and potential exposures."

About Lockton

More than 5,300 professionals at Lockton provide 41,000 clients around the world with risk management, insurance, and employee benefits consulting services that improve their businesses. From its founding in 1966 in Kansas City, Missouri, Lockton has attracted entrepreneurial professionals who have driven its growth to become the largest privately held, independent insurance broker in the world and 10th largest overall. Independent researcher Greenwich Associates has awarded Lockton its Service Excellence Award for risk management for large companies. For six consecutive years, Business Insurance has recognized Lockton as a "Best Place to Work in Insurance." To see the latest insights from Lockton's experts, check Lockton Market Update.

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SOURCE Lockton

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