Chinese retailer introduces infant formula recall insurance

A Chinese insurer is capitalising on the consumer sentiment in China at present regarding the safety of infant milk formula.  After a number of product safety scares and recalls of infant powdered milk formula in China, this insurer is offering the consumer compensation if a recall were to occur.  The nature of this product, considered a staple rather than an optional purchase, could potentially support the take up rate of the insurance product.

One can only admire the innovative approach from the insurer for offering a unique product to profit from this consumer uncertainty, but what it really highlights is the high level of uncertainty in China regarding the safety of this type of product across all brands.  If it were simply a single brand considered unsafe then sales of that brand would plummet and others would profit.

We hear a great deal about reputational risk from the perspective of a company developing and maintaining confidence in their brand. Whilst there is no doubt new entrants have capitalised on this uncertainty from some of the original brands, still the industry has a task ahead to rebuild this confidence.  Having a recall insurance product like this in the market is not likely to help!

Read here for more on this unique recall policy.