Chinese Manufacturer Product Insurance Has Its Own Special Risks

Chinese Manufacturer Product Insurance Has Its Own Special Risks

When sourcing products from Chinese factories, foreign product buyers often assume they can require their manufacturer to carry insurance that will cover any defects or injuries caused by the product. However, the reality is that relying on Chinese suppliers for adequate insurance rarely provides real protection. Chinese policies often have limitations or exclusions that prevent Western companies from collecting claims. This post explains why foreign companies should consider securing their own comprehensive product liability coverage rather than trust their Chinese partners.

Real-world Scenarios: Behind the China Product Insurance Curtain

A startling number of Chinese manufacturers operate without adequate insurance for the products they make and sell worldwide. Additionally, our China lawyers have seen many instances where Chinese manufacturers agreed to purchase insurance but never did, even going so far as to provide fake insurance certificates

Now just for the fun of it, assume that your Chinese manufacturer is one of the few that actually does invest in insurance, the odds of you as a foreign company being able to collect against that policy are just not good. Not only that, but your Chinese supplier’s increased costs from that policy will no doubt be reflected in what it charges you.

The Safer Bet: Get Your Own Insurance

Our advice to our clients is that it will usually be easier/cheaper/safer for them to secure its own insurance, rather than relying on their Chinese counterpart. Why pay someone else (through increased product pricing) to buy Chinese insurance that you probably can never be certain exists and will be difficult if not impossible to collect against instead of just securing and paying for the insurance yourself?

Key Takeaways:

Companies that buy products from China will usually be better off purchasing their own product insurance than relying on their suppliers. Your best protection will usually be achieved by using an insurance broker who understands your industry to secure a policy that specifically covers your products and risks. Though requiring your Chinese manufacturer to secure its own insurance may seem like an easy solution, getting your own tailored product liability coverage will usually be a better bet.