The sports nutrition category is robust and growing as a result of demand for all kinds of performance products, including drinks, powders, bars, etc. From a product liability insurance standpoint, the majority of these products do not face any particular challenge in securing insurance. Sometimes, if the product appears benign enough, it can be sold to the insurance companies as food, rather than a dietary supplement (e.g., an energy drink that is a beverage rather than a supplement). If an underwriter will accept it as a food product, the result will be a much lower product liability rate. But I digress.

The subcategory of sports nutrition products aimed at bodybuilding enthusiasts is where the challenge lies. The vast majority of these are indeed dietary supplements. Furthermore, some of the products in this category are also promoted as weight loss products, which only further complicates the jaundiced eye that insurance companies give them. Why? Statistics indicate losses paid out by the insurance companies for dietary supplements originate predominately from three categories: weight loss, sports nutrition, and sexual enhancement products.

The sports nutrition category probably gets more than its fair share of unfriendly treatment by the media. Unfortunately, there is a consistent flow of negative news about these products. During the past year we’ve seen stories related to:

• FDA cracking down (with warning letters) on supplement companies selling products with methylsynephrine (underwriters are deathly afraid of “the next ephedra,” an ingredient that handed them millions of dollars in losses).
• The general association of the bodybuilding sport with steroid use.
• The continuing battle over the legality of DMAA. No matter which side you are on, the activity serves to keep DMAA in the news, and more often than not the news has negative connotations.
• Professional athletes getting suspended from their sport for using banned substances, where often the defense is, “I was taking this dietary supplement and I didn’t know it was in the product, and it sure wasn’t on the label.”
• The ongoing haranguing of the industry by the likes of Consumer Reports and other media outlets, where the subject matter often boils down to controversial ingredients used in bodybuilding or weight loss products (e.g., sibutramine).

Effects of Negative News
There are two sides to every story, but negative news has a way of finding its way into the psyche and blocking any positive news that might offset it—if any of the latter is even presented, which it often isn’t.

Insurance underwriters for product liability insurance live in a business environment like all of us, in terms of job experience. Some are completely new to the subjective practice of underwriting, and know virtually nothing about the supplement industry. Some have moderate knowledge of the subject, and a few have a depth of knowledge; the latter can cut both ways too.

But what if the underwriter looking at your account, with almost zero knowledge of supplements, ingredients, dosages, GMPs, and the like, is bombarded by all of the available media about adulteration, investigations, and warnings that swirl around the sports nutrition industry? All else being equal, the underwriter will find it much easier to quote a company selling only multivitamins and shy away from a sports nutrition company.

Here’s how arbitrary the underwriting process can be. Recently, we had a sports nutrition retailer that was declined insurance by one underwriter merely because he found information on the Internet that his contract manufacturer has been cited by FDA for some GMP violations. Talk about guilty until proven innocent!

An Emerging Problem—Caffeine
Recently, at least two of the insurers offering product liability insurance to the industry have put caffeine under the microscope. Scores of studies have been done on the safety of caffeine, with the usual conflicting conclusions. But these two carriers just recently embraced the view that too much caffeine in a dose of a supplement is dangerous and might give them insured claims. It’s their right to think that of course, but how much is too much? One carrier limits caffeine to 250 mg per dose; a dose higher than that in your product will make you uninsurable with that carrier. The other is more flexible, judging the acceptable dosage amount on a case by case basis.

But where do we see high dosages of caffeine? In sports nutrition products (very often in pre-workout products) and weight loss products. Recently, we saw one pre-workout product with 400 mg in a dose, and certainly there are others with that much or more. (Note that I am not judging caffeine dosages. I am merely making readers aware of certain criteria being applied to their products.)

Another ingredient common in sports nutrition products is yohimbe, which we can get the underwriters to cover if we negotiate the removal of the exclusion upfront. 

So how does a company walk through the minefield that is insurance underwriting, in the face of these hurdles seemingly imbedded in the bodybuilding/weight loss category? In our Dietary Supplement Practice, we know which underwriters will embrace the category, and which will not. We “pre-underwrite” sports nutrition, looking for ingredients such as yohimbe that will need to be covered. We also scour the Internet just like the underwriters, but we look for positive articles written about certain ingredients or other unique situations, and we submit those to underwriters as part of their education about the industry, the result being that our client gets the best possible quote. When searching for or renewing your product liability insurance, a combination of a knowledgeable insurance broker and your active participation in the buying process will guarantee the best outcome for your company.

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Greg Doherty
Bolton & Company

Greg Doherty is a commercial insurance broker with Bolton & Company Insurance Brokers and Employee Benefits Consultants, Pasadena, CA. He is the executive vice president and managing director of the Dietary Supplement Practice Group for the firm, which specializes in the nutritional product and dietary supplement industries, including but not limited to contract manufacturers, raw materials suppliers, distributors/retailers. Mr. Doherty has four decades of experience as a broker, focusing solely on the dietary supplement industry for the last 14 years. He can be reached at gdoherty@boltonco.com; Phone: 626-535-1409; Website: www.gregdoherty.net.