Technological innovation in the food industry: increasing quality control and preventing product liability claims and recalls
Technology is developing at rapid pace and no more so than in the food product industry. Artificial intelligence (AI) as utilised within the food industry was valued at around US$3 billion in 2020 and is predicted to grow to around 10 times that figure by 2026. This is indicative of an area with clear potential for transforming the way food is grown, produced, packaged and distributed, and how the associated risks are managed.
Agriculture and production
‘Precision agriculture’ uses drones to gather data about the health of soil and crops to be analysed in order to rectify diseased or damaged crops and produce greater yield, both in terms of quality and quantity. Identifying poor quality at this earlier stage of the food product cycle is essential to the prevention of recalling produce later down the line and for gaining the trust of consumers.
An uptake of drones and AI in the poultry industry can also translate to healthier, and greater quality eggs and chicken. Drones encourage the use of free range farming by precisely detecting avian disease symptoms, such as nasal and saliva secretions. This data is then analysed and the diseased chickens can then be swiftly identified and segregated to prevent them infecting healthy chickens.
Food processing and packaging
Novel applications of advanced technology are also prevalent in the processing and packaging stage. E-noses assist by detecting bacteria, off-odours, and distinguishing between different food products to prevent adulteration. For example, a specific application analyses whether olive oil is pure or has been adulterated with another oil for cheaper production. Both consumers and producers stand to benefit as food quality increases and trust is maintained as a result.
Similarly, the use of nanotechnology in food packaging is making strides in preserving the safety and freshness of food. ‘Smart packaging’ can have the capability of sensing when the food product is deteriorating in quality, changing the colour of ink on the packaging to warn consumers and retailers that the food has perished and should not be consumed. It is anticipated that adoption of this technology should in turn see food manufacturers face less product liability claims and product recalls arising from contaminated food produce.
Distribution and recall
To illustrate the gravity of food recalls, in the US, where many of the major players in the food industry are based, the average cost of each, individual recall for a food company is in the region of US$10 million. These costs include managing notifications to regulators, disposing of the affected products, and investigating the cause - but not any compensation payments.
The proper collection and processing of data, however, can massively mitigate these costs. Blockchain is the primary mechanism for achieving this. By having a distributed ledger with no central authority with each block containing a ledger of information (often being transaction data), the recorded transactions can be accessed quickly and products tracked and traced with efficiency.
Blockchain significantly reduces the amount of time it takes to trace the source of a food product. Walmart - part of the IBM Food Trust Blockchain, a network of companies utilising blockchain for greater efficiency in monitoring its supply chain - claimed it reduced the whole process of tracing down the relevant food products from around seven days to a mere 2.2 seconds. Being able to act so quickly considerably reduces both costs and the risk of reputational damage. Regulators can also be notified more efficiently by using the data from the blockchain allowing companies to get back to business quicker.
However, as futurist and National Geographic show host, Jason Silva, pertinently said “technology is, of course, a double edged sword. Fire can cook our food but also burn us”. Using technology that has not stood the test of time presents unknown risks, for food manufacturers and their insurers. Malfunctioning hardware and software bugs can lead to failure in detecting harmful contamination, which can lead to costly disputes between various parties in the supply chain.
To mitigate the risks of untried technology, warranties should be in place to ensure hardware and software are kept up-to-date.
Precision technology, and blockchain specifically, provide for greater certainty when evaluating risk, providing greater ease and less hesitancy when setting premiums and agreeing terms of policies.
Given the positives definitely appear to outweigh the negatives, insurers of food manufacturers should welcome with open arms and encourage the usage where possible of such technological innovation by their insureds, in order to mitigate future risk.