What is Efficacy insurance?

Efficacy Insurance is designed to cover the failure of an item or service to perform its intended function. It is also known as Failure to Perform insurance.

Efficacy insurance is commonly required by businesses involved in the manufacture, service, supply or installation of performance-critical products. In fact, trades involved with fire, security or electrical contracting will often have to prove they have efficacy insurance before they are granted a contract or permitted to join their trade body.

Similar requirements are often asked of manufacturers and suppliers of safety-critical items, such as medical devices or vehicle safety components.

Benefits of efficacy insurance

The benefits of efficacy insurance include:

  1. Financial compensation for loss of income or damages incurred as a result of product or service failure.
  2. Increased confidence for consumers, who know that they have protection if the product or service does not perform as advertised.
  3. Reduced risk for manufacturers and service providers, who can avoid the financial and reputational costs associated with product or service failures.
  4. Improved customer satisfaction, as customers are more likely to trust and continue to use products and services from companies that offer efficacy insurance.
  5. Enhanced reputation for companies, as offering efficacy insurance can demonstrate their commitment to providing high-quality products and services.

Factors to consider when choosing efficacy insurance

Although efficacy insurance is normally purchased as part of a public & product liability policy, many standard public liability and product liability policies will exclude efficacy cover, so it is essential that you check that you have the correct level of cover your business requires. 

This is particularly relevant in performance and safety-critical products and services. For example, if you are manufacturing, supplying or installing smoke detectors and a building with your detector burns to the ground with multiple casualties, a standard public & products liability insurance policy will be unlikely to cover you if the smoke detector had failed to work correctly unless efficacy cover is included.

What other products may I need alongside efficacy insurance?

If your business provides consultancy, advice, testing or designs you may also need professional indemnity insurance. If you want to insure against the costs of your product not meeting specifications, or standards, or posing a safety risk, you may need product guarantee insurance or product recall insurance.

If you believe the failure of your product could have far-reaching consequences then please get in touch – we have decades of experience helping our clients with their efficacy insurance.

We can help you understand what insurance you do, and do not, need