Efficacy insurance

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What is Efficacy insurance?

Efficacy insurance is designed to provide liability cover should an item, product, component or service fail to perform its intended function; it is also known as failure to perform insurance.

For example, a fire detection and alarm system installed by a contractor might not cause injury or damage, but if it fails to operate correctly, it could lead to damage, injury or loss of life. A standard public liability or products liability policy may not cover this resulting claim, which is why efficacy insurance is important.

Where products or services are safety critical, there is often a contractual requirement for the manufacturer, supplier or contractor to have efficacy insurance. This is commonly required in sectors such as fire, security, automotive and medical devices.

If you are providing services, design, installation or consultancy relating to safety-critical products & services, you may also need to consider professional indemnity insurance.

You may also wish to consider Product Recall Insurance and Product Guarantee Insurance, which give additional levels of cover should products be found to be faulty or dangerous.

If you would like a quote for Efficacy Insurance or have a contractual requirement for Efficacy Insurance, please contact Sutcliffe & Co on 01905 21681 or contact us here.

Fire & Security Industry Insurance Explained

Frequently Asked Questions About Efficacy Insurance

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:
Financial compensation for loss of income or damages incurred as a result of product or service failure.
Increased confidence for consumers, who know that they have protection if the product or service does not perform as advertised.
Reduced risk for manufacturers and service providers, who can avoid the financial and reputational costs associated with product or service failures.
Improved customer satisfaction, as customers are more likely to trust and continue to use products and services from companies that offer efficacy insurance.
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 you must check that you have the correct level of coverage 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 fails to work correctly unless efficacy cover is included.
What other products may I need alongside efficacy insurance?
You may also need professional indemnity insurance if your business provides consultancy, advice, testing or designs. Suppose you want to insure against the costs of your product not meeting specifications or standards or posing a safety risk. In that case, you may need product guarantee insurance or product recall insurance.
If you believe the failure of your product could have far-reaching consequences, please get in touch – we have decades of experience helping our clients with their efficacy insurance.
What businesses require efficacy insurance?
Sometimes it can be contractual requirement or compulsory to become a member of a trade body but even if it is not a requirement It is sensible to have efficacy cover if your products or services are safety critical or if failure can have serious consequences. Examples where efficacy insurance is important include manufacturers and suppliers of: Fire safety equipment, braking devices, buoyancy aides, helmets, security equipment, medical devices, emergency lighting, seatbelts, etc. This could also include manufacturers and suppliers of components that are used in these products.
Why is efficacy insurance compulsory?
How to buy efficacy insurance?
If you want to purchase efficacy insurance, please contact Sutcliffe & Co on 01905 21681 or contact us here. Ordinarily efficacy insurance will be added to or included within a Public & Products Liability insurance policy, because the covers are overlapping. Alternatively it might also be combined with a product guarantee or product recall policy. If you are involved with services such as testing, design or consultancy we might look at also combining with Professional Indemnity insurance.
How much does efficacy insurance cost?