The so-called Platinum Program was developed in concert with Chicago-based insurance broker RT Specialty. Over the past year RT has worked with UNPA to identify and quantify all of the underwriting quirks of the industry. The result, Israelsen said, is a program that offers higher levels of coverage than had previously been available, up to $20 million.
In the underwriting process the program will look at a company’s compliance with GMP rules, the management of its supply chain and how it monitors its products in the marketplace. The result, Israelsen said, is an insurance program that does a better job of covering the risks dietary supplement companies incur while still keeping the costs reasonable.
“The principle here is that like a good driver policy or a preferred risk customer, companies can qualify for enhanced coverages at preferred rates. If you can demonstrate core competency in supply chain management, if you have third party certifications, if you are doing things like properly managing adverse event reporting and diligently monitoring your social media presence, then the underwriter has a higher level of confidence of that company’s ability to manage risk,” Israelsen told NutraIngredients-USA.
Rewarding the good actors
Israelsen said the program addresses something that he has been harping on in public forums for a while: There is insufficient reward for companies that do it right. He has addressed the issue with FDA in connection with GMP compliance. Why, Israelsen has asked, couldn’t FDA provide some sort of affirmative statement on a company’s GMP compliance status? Some sort of grown-up version of a gold sticker on a homework paper? The agency has steadfastly rebuffed these suggestions, saying in effect its mission is to enforce the law and it is not in the business of promoting companies.
With this new insurance program, UNPA gets something of what it was looking for. Companies that meet the rigorous standards will be allowed to use a seal on their labels and promotional materials (the seal itself and the guidelines for how it may be displayed are still under development). Israelsen said it is hoped that the seal will become something of a mark of quality and might prove a way for companies to differentiate themselves in the marketplace.
“For the first time in our industry we are now in a position to reward companies that are making all the right investments. We think this will be a strong indicator that a company that qualifies for this program is one that meets or exceeds high standards,” Israelsen said.
“They were under rewarded in the marketplace and insurance was one market where we thought we could make a difference. We want to encourage best practices and we think this in an incentive to do that,” he said.
Deep dive into compliance
Israelsen said that other companies offer liability coverage to dietary supplement companies and will continue to do so. The difference with this new program is that it was developed over the past year in a collaborative process between RT and UNPA, giving the brokerage’s underwriters an encyclopedic look at all of the challenges and points of risk within a dietary supplement company’s operations.
“This is by far the most comprehensive program out there. We took our many years of understanding of the industry and working within the industry to help RT to develop a way to assess a company’s operations. The result is that a company that qualifies could buy up to $20 million in liability insurance coverage, which is substantially higher than what is available today,” he said.
For example, Israelsen said the program is detailed to the point of looking at how a company tests raw materials. It will also look at how a company qualifies its vendors and whether on site inspections have been done of domestic and foreign suppliers, either by the company itself or a designated agent. And it will look at a company’s quality control staff, whether they have the right credentials and how up to date their training is.
Companies on the fringe
Whether a company has received an FDA warning letter is one of the criteria UNPA and RT considered when deciding where to draw the line of which companies will qualify and which won’t. Is the receipt of a warning in and of itself a deal breaker?
“A warning letter would not exclude a company from applying; what we would be in interested in is what the resolution of the warning letter might be. Sometimes warning letters can be about the agency trying out a new line of enforcement. The real issue is what the company does then. That demonstrates the executive suite’s attitude toward compliance,” Israelsen said.
Israelsen said that the underwriting process could also become a teaching tool for companies that are trying to improve their operations and compliance status but might still have a ways to go.
“We would love to work with companies that are looking for direction. This could be a good tutor for companies that would like to know what best practices look like,” he said.
Israelsen, Michael Garofalo, senior vice president of the national life science practice at RT and Mark Wood from the underwriting firm Life Science Risk will introduce and explain the new program at a session at the Natural Products Expo West trade show that takes place in early March in Anaheim, CA.