Product liability: customers wait for insurance company

Gas companies’ awareness of buying product liability insurance increases higher than before. Although there are many companies buying product liability insurance to bring more trust to customers which is an effective marketing tool. However, few insurance companies are qualified and courageous to provide this kind of insurance.

Product liability: customers wait for insurance company

Difficulties in providing product liability insurance

According to a survey at companies providing this product, revenue of product liability insurance is still modest, only takes up 1% total revenue. Although there is not official statistic, whole liability insurance sector accounts for approximately 2% of total premium of whole non-life insurance market and the compensation rate is under 10%. Exception is that a top insurance company has compensation rate up to 84% in the first quarter of 2014.

Talking about the paradox of product liability insurance when the supply is more than the demand, a representative of a non-life insurance company shares that product liability is quite complicated in terms of fees and compensation. Product liability is known as long-tail product because the period when customer sues may happen a long time after buying product. At that time, insurance company still takes responsibility so that the risk is very high.

A representative of an insurance company said that the awareness of buying product liability insurance is more popular with gas, cosmetic providers and so on recently.

Domestic product liability insurance

There are not many insurance companies providing product liability insurance (only a few of the non-life insurance companies), but in the future, when the demand of product liability insurance increases significantly, the smaller insurance company will try to improve competitiveness to take part in this “playground”.

Of course, there is a long road between theory and reality, but when the economic context has got many difficulties, the demand for property and marine insurance decreases, the product liability insurance may be another attractive segment. Moreover, after the economic crisis, the non-life insurance sector is in the phase of restructuring insurance products, changing orientation, instead of just focusing on premium products generate higher revenues but customers increasingly diminished as difficult.

Product liability insurance is to protect the manufacturer or the distributor in cases where products have adverse effects, leading to the manufacturer / distributor is responsible to compensate the customer. A fairly common example is insurance of gas tanks. When manufacturing companies participating insurance product liability, corporate customers will be compensated insurer / behalf manufacturing enterprises have a legal responsibility to pay compensation for personal injury / material damage caused to the 3rd person in the insurance period due to a problem related to business operations.