Grocery retailers traditionally face a number of risks that are not covered by typical property, crime or cyber insurance programs.

A new white paper report from global independent insurance broker Lockton — “Insuring the Operational Risks of Grocers with Intangible Risk Insurance” —examines some of these perils grocery retailers face that are often not covered.

Co-authors Emily Freeman, Lockton risk management specialist, and Lisa McAleenan, Lockton senior vice president for Financial Services, identified five intangible risks:

  1. Reputational Harm: This type of coverage responds to brand damage (as a result of adverse social and traditional media attention), which causes loss of business. This could include security and privacy breaches, food safety concerns, allegations about legal compliance, workplace violence, and a disruption in critical computer systems.
  2. Regulatory Shutdown/Intervention: As major grocery chains are increasingly relying on independent, third-party certifiers to ensure product safety, this is an increasingly important risk peril. Though many chains now have safeguards in place (e.g. vendor certification), government inspectors still have the power to potentially shut down individual stores for health and safety concerns.
  3. Supply Chain Risk: Risks related to natural or man-made disasters, contagious disease, terrorist activity, and war could disrupt the flow of products and the ability of customers to travel, which may adversely affect revenues. Essential suppliers may not be able to deliver products on time, which could hinder a grocer’s ability to operate.
  4. Direct and Contingent Network Risk: This type of insurance indemnifies a grocery retailer against computer network disruption that impairs its system or any third-party systems it depends on to conduct business—specifically disruptions that result in a net profit loss. Perils covered include computer attacks, cyber terrorism, malicious damage, and administrative or operational mistakes.
  5. Intellectual Property Infringement: Some grocers have purchased companies whose real worth is associated with intellectual property (particularly patents developed software for customer internet services). If the acquiring company becomes the target of an intellectual property lawsuit after the purchase, it may not be able to sell or use the products that that are named in the injunction.

The Lockton report offers advice  on working with a broker and underwriter to customize insurance program that address such exposures.

According to Freeman, once the risks are identified, insureds may have their policies “stress-tested” with scenarios so they know where insurance gaps may be.

“While grocers are not required to purchase more coverage than is relevant to their traditional risk profiles, these perils can impair or disrupt their own systems or those systems they depend upon,” said Freeman.  “Consulting with a broker and underwriter to review claims and settlement history is a key first step in crafting a policy that addresses unique needs and potential exposures.”