The variety of food and beverage options continues to advance. Functional foods and beverages are very hot right now. For us, in insurance, functional foods and beverages seem to fall in between traditional insurance underwriting guidelines.
Before we jump in, what are traditional underwriting guidelines? The more “science” ingredients a product has the more “standard” insurers are not interested in providing insurance coverage. Does not mean the product is dangerous or unhealthy but it is beyond their underwriting comfort level. Examples would be protein powders, nutrition bars and some energy drinks.
Standard insures like products marketed for taste and quality. They like ingredients that they are used to seeing. Breads, cookies, fruit juices, sodas and the list goes on and on.
Functional products seem to have aspects of both. Traditional food products marketed differently seem to create issues for standard insurance companies.
We see typical food products packaged and marketed almost like a traditional supplement. Plant based protein products look similar to traditional whey based powders. Beverages that claim increases in energy, vitality and recovery due to the natural impact of particular fruits or vegetables also fall into this category.
So what makes them “functional”? Again, from an insurance perspective, a food or beverage that claims certain health benefits seems to fall into this category. However, many of the ingredients are not from “science” but regular food products. The name and marketing leans towards health benefits but the ingredient list is not “science” based at all. Insurers get confused.
We find that most manufacturers put a lot of time into what is said and not said on a label but marketing is marketing. Insurers like to see the label, websites and social media to get an idea of the target market. The more it looks like a traditional supplement the more insurance will cost because the standard insurers will be unwilling to insure the product. Chickpeas have been around a long time but when marketed as a high protein meal replacement the chickpea is viewed in a new light.
Don’t make a product to keep insurance companies happy. Make the product you feel good about and that you think will sell.
Our approach is to always try the least expensive option first. We try and make the best case we can for functional products. This is especially the case when the ingredient list has many recognizable items. We sometimes feel the insurance company approach to some functional products is very conservative.
Unfortunately, we do not make the rules but we have learned how to play the game. If we cannot convince an underwriter of the simplicity of the ingredients we turn to another group of insurers for coverage. We find the supplement and energy drink insurers are more than willing to insure functional products. To them these products seem low risk in comparison to what they would normally insure.