Firms ignore product liability insurance

BUSINESS FOCUS: CONSUMER PROTECTION

Few local businesses have product liability insurance despite the enactment of stronger consumer-protection laws this year.

Companies risk being caught off-guard by the new law if they have no insurance.

"Most Thai consumers are still completely unaware of their legitimate rights on product liability issues, while operators who are now reeling under financial constraints from the economic crisis are reluctant to buy such policies to avoid higher costs," said Jirayu Varaporn, a member of the General Insurance Association's working panel on product liability insurance.

"In the short term, we expect low response to product liability coverage."

Product liability insurance is not new to Thailand. It has been offered for many years by companies such as Ace Insurance, AIG and Allianz CP, which are affiliated with foreign firms.

But until now most products have had international terms and conditions, offering a wide geographical coverage and extensive protection.

Under the guidelines prepared by the association and endorsed by the Office of the Insurance Commission (OIC), locally designed products will provide protection only within Thailand's jurisdiction and only for physical injury, property damage and legal fees.

International terms and conditions usually extend protection to personal injury, which covers physical and mental injury, said Mrs Jirayu, also senior manager of Siam City Insurance.

"During public hearings, we received overwhelming participation from local operators, particularly among small and medium-sized enterprises," she said.

"But their uptake turned out to be relatively low, probably because we've not yet heard of big losses within businesses from product liability cases."

But companies risk being caught off-guard by the new law if they have no insurance, she said.

"The risk is clear - almost any company can be sued. However, product liability insurance is a proven solution to protect against the serious financial consequences of potential claims," she said.

"Thai businesses should take a detailed look at their potential risk exposure. Given the country's booming manufacturing industry and the amount of Thai products in the global marketplace, companies should seek professional advice to proactively manage their financial exposure before it's too late."

Product liability insurance protects businesses from claims related to the manufacture or sale of products, food, medicines or other goods to the public. It covers liability for losses or injuries to a buyer, user or bystander caused by a defect or malfunction of the product and, in some instances, a defective design or a failure to warn.

The policy usually dictates a maximum amount of liability based on business risks, turnover and limit of liability. It typically covers a range of expenses related to any claim, including legal fees, court expenses, damages and claimant's costs but does not cover punitive damages.