What happens when products don’t perform as intended?

By Tim Weymouth, Associate Director, ACII, AIoL

When something you purchase fails to work as it was intended to, the consequences can be distressing. I recently experienced a case of this when I found myself left in charge of clothes-washing duties. My wife was going on a trip and wrote me some simple instructions – separate the whites, colours, and darks; but if I should have to mix a load, use a colour catcher. 

All was going well for the first few days and the clothes were distributed into their relevant colour categories. That was until I neared the end of the pile and realised there was about a third of each colour load left. I was going to need the colour catcher. I chucked in the washing along with the colour catcher and turned the wash on as usual, failing to even glance at the colour catcher instructions. 

‘Beep, beep’

Washing cycle completed, I confidently walked over to the machine, only to find things had not quite turned out as I expected. Everything that was once white had become a pale, unflattering shade of pink. Oops.  In this instance, having neglected to change the previously used setting from 60c to a cooler  temperature for the colour catcher to do its job effectively, the disaster (and blame) was very much on me and not the colour catcher. However “pink-gate”, as it came to be known in my family,  got me thinking about how important Efficacy insurance can be to customers.

What is Efficacy insurance, and why do I need it?

Efficacy insurance is essentially protection for when something you’ve been supplied doesn’t perform its intended function. Although the colour catcher didn’t damage my clothes – I can still wear them – the items are no longer white, so therefore the colour catcher hasn’t performed as intended. This situation translates well into other situations. Think about the products and services your company offers and what may happen if they fail to perform correctly.

An example of this happening in a business case scenario is with Always Right Temperature Ltd (ART), a company that manufacture air conditioning units to luxury hotels. A hotel that had ART units installed in its kitchen was due to host a four-day wedding. However, extreme temperatures occurred which the units couldn’t cope with. This resulted in unworkable conditions for the catering staff, and therefore the wedding had to be cancelled. 

The hotel proceeded to take legal action against ART to cover the costs incurred for being unable to host the event. Unfortunately for ART, their insurance broker had recommended a cheaper quotation at renewal which  very clearly excluded efficacy, meaning the insurer would not cover them if the product failed to perform its intended function.

So again, ask yourself: “What happens if our products don’t perform as intended?” It’s essential to consider this risk, rather than simply whether your product will lead to bodily injury or property damage. Ensure you’re properly protected by searching for wording such as ‘Efficacy, failure and perform’ on your policy document – you may just have a sneaky exclusion you’re not aware of. 

And for companies that manufacture components that go into larger products, there are a host of other considerations and relevant insurance. These will be covered in another article soon. 

Make sure your business’ proverbial washing is properly separated and talk to one of our specialist team today on 07557152973 to discuss all things efficacious.