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    Personal preferences: Managing risk in the growing personalized supplements market

    Sarah Fiorito, Miscellaneous Medical and Life Sciences underwriter at Beazley

    From tapeworms to leeches, mercury to radium, the list of unlikely and seemingly outlandish remedies that have been popular throughout history is long, but perhaps not surprisingly so. Our natural concern for our health means that people are eager to try new and varied tonics and treatments where there is a perceived health benefit.

    There are some well-known examples of supplements that are widely recommended by physicians, such as taking folic acid during pregnancy to reduce the risk of spina bifida and other birth defects.[1] When used properly to complement a healthy diet and lifestyle, supplements can promote good health and wellbeing, however, unlike medicines, there are many readily available supplements that cannot claim to cure or prevent disease. A healthy and balanced diet will provide most vitamins and minerals that the body needs, and there is even evidence that some supplements may harm the body if taken incorrectly or without professional guidance.[2]

    Yet the supplement and wider wellbeing industry is booming. According to the American Council for Responsible Nutrition’s (CRN) 2019 consumer survey[3], over three quarters of adults take supplements in some form or another. The COVID-19 pandemic has also acted as an accelerator for the market thanks to a combination of factors including the need to self-medicate for minor ailments, the desire to improve overall health and immunity and the mounting suggestion that supplements such as vitamins D and B12 could help to prevent or treat COVID symptoms.[4] Sales of vitamin and mineral supplements rose sharply in 2020 in the US and in excess of 50% in March as the spread of the virus accelerated.[5]

    The tailored approach: a regulatory minefield

    The decision regarding which supplements are most beneficial and in what combinations they should be taken is still largely self-defined by the customer. For example, someone who regularly feels tired and run down may be drawn to supplements that claim immunity boosting properties, while muscle recovery may be the attraction for an active gym-goer. The rationale behind a person’s search terms might also be based on aspirational lifestyle choices and there is certainly a booming market that utilizes this psychology to its advantage.

    In a saturated market, personalization – meaning the suggestion of supplements based on one, or a series of, personal tests to ascertain an individual’s particular health requirements – is a means of differentiation.

    With the rise of online markets allowing consumers to search based on multiple variables, in addition to a shift towards a more tailored approach, the more generic ‘off the shelf’ model that has been used for decades is being replaced with a process that enables customers to find a product correlated to his or her own specific dietary needs or goals.[6] Some manufacturers are now utilizing algorithms to identify deficiencies that may inform the customer’s choices.[7]

    Other tools being deployed to inform personalized solutions are online assessments, diagnostic testing kits and virtual consultations. The latter might involve consulting with a physician or specialist in order to create a personalized treatment plan and may include nutritional counseling, body composition testing and specialty lab tests in order to provide recommendations on homeopathic, holistic or nutraceutical treatments.

    Diagnostic testing can provide a customized vitamin blend to match the user’s genetic results. These tests may require an oral swab to capture the individual’s DNA or a blood test for micronutrient assessment, both of which require approval by US Food and Drug Administration (FDA) in advance.[8] These tests are designed to identify the appropriate dosage based on the individual’s blood nutrient levels and cannot make any false claims about the benefits of the personalized recommendations that are generated as a result. Nutraceutical companies seeking to personalize their services through the use of testing kits must be aware of the FDA’s regulations surrounding direct-to-consumer tests and medical devices[9] and be prepared to invest the time, resource and funds to ensure that regulations are met.

    For companies involved in the industry, from manufacturers through to online vendors, this is a time of both opportunity and potential exposure should they fail to understand, or adhere to, strict FDA and Federal Trade Commission (FTC) regulation. For this reason and due to the increased scrutiny they would be likely to face, the number of companies offering true personalization remains limited for the time being.

    If the trend does continue, with specimen-based personalization and physician consultations increasingly the norm, the line that divides nutraceutical consumers from patients under treatment could become increasingly blurred. If underlying health issues are discovered as a result of nutraceutical testing, what is the moral obligation of the industry towards their consumers? Over time, regulation may become increasingly tighter and the need for greater cohesion and collaboration with the medical sector a necessity as opposed to a distinguishing factor.

    End-to-end coverage is key 

    When it comes to health and wellbeing, consumers are not only buying a product, but a lifestyle. For the majority of consumers, it not only matters what a product claims to do but also how it’s made and the origin and quality of the ingredients.[10] It is increasingly important to consumers that the supply chain is transparent from end-to-end, evidencing the use of high-quality and sustainably sourced ingredients.

    Given the growth of the industry and increasing public interest, every step in the supply chain is subject to scrutiny, which is why it’s essential that each stage is indemnified against the wide-ranging risks that they face. Coverage requirements largely depend on the operational remit  of the individual entity and coverage combinations will vary on that basis. However, given the specialist insurance requirements of organizations in the sector, it is imperative that the chosen insurance provider is able to offer flexible yet comprehensive coverage, underwritten with sufficient expertise to ensure that the coverage is tailored for purpose and that no gaps  remain.

    Products liability offers protection from a bodily injury or property damage claim should a supplement, or its raw nutraceutical ingredients, be contaminated during the manufacturing process. Defective diagnostic testing kits would also be covered by products liability insurance, which often forms part of a general liability policy. 

    Those diagnostic laboratories that examine medical tests such as oral swabs and blood samples and produce results that assist doctors with making a diagnosis may require one, or a combination of, professional liability and errors & omissions coverage to protect against any error or mistake made when analyzing the tests .

    Lifestyle and wellness entities that  involve a virtual consultation with a physician through the use of apps would require a policy form combining professional liability with technology, media and cyber liability to  protect  the physician as well as the technology platform upon which services are being accessed and utilized.

    What does the future hold?

    It remains to be seen how the personalization aspect of the supplement market will develop, but the health and wellbeing industry is here to stay.

    With the global dietary supplement market currently valued at over $160 billion and predicted to grow by a compound annual rate of 6.5% year on year until 2026[11], the competition to meet increasing demand is only set to grow.

    Following the global COVID-19 pandemic, the demand for preventative healthcare solutions is rising around the world. As more and more people turn to nutraceuticals to boost their physical and mental wellbeing, there is a strong possibility that the market will be inundated with new entrants. And, while personalized nutraceutical offerings may be a differentiating factor, a reputation built on trust and quality will likely be the most significant differentiator when faced with cheaper and perhaps less transparent competition.

    To reap the benefits, nutraceutical producers and vendors must continue to analyze their exposures and have robust risk management plans in place to ensure they are positioned to maximize their opportunities. In the same way that customers are seeking to mitigate future health risks, so too should nutraceutical companies seek to safeguard their own wellbeing.

    About the author:

    Sarah joined Beazley in September 2015 as an underwriter for the Miscellaneous Medical team. Prior to joining Beazley, Sarah focused on dietary supplements, pharmaceuticals, medical devices and other life sciences risks as an underwriter for Kinsale Insurance Company. Sarah graduated from The College of William & Mary.

    Sarah Fiorito
    Sarah Fiorito

    Underwriter - Miscellaneous Medical & Life Sciences

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