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Food Liability Insurance Made Mandatory in China

food liability insuranceThe Chinese government is going to make liability insurance mandatory for the food industry with the objective of improving food safety in the country. The new legislation will apply to food processors, producers, caterers and distributors. Currently, the only mandatory insurance policy in China is motor third-party liability insurance. Local media has reported that the China Food and Drugs Administration have submitted a draft bill to change the country’s food control laws in October this year. The main talking point of the draft is the proposition to make liability insurance a legal requirement for food-related businesses.

Mr Yang Zhao, former China Life Insurance party secretary and lawmaker has stated that the current penetration rate in the food industry is approximately 10%. Of these food businesses that have insurance, the policies are only purchased in order to meet export requirements. However, some studies have claimed that the penetration rate is actually less than 1%. These percentages are extremely low, especially because insurers have been offering insurance policies to these businesses for over 7 years.

At present, only 20% of food production and processing businesses in China employ more than 10 people. The other 80% are plagued with low quality management and poor following of regulations. This is because profit margins are very small; therefore businesses are unlikely to incur extra costs where possible, such as insurance. The Insurance School’s vice dean Professor Xu Xiaohua said: “The first condition for promoting food liability insurance must be the compliance with food production laws. If an enterprise violates food production laws, then it does not qualify for liability insurance.”

A series of food scandals in China over the years have led to this new legislation being considered. These scandals include powdered milk being tainted with melamine, cooking oil made from waste and sprouts being treated with sodium nitrate.

James Savery, 06 November 2013

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