0:22

A recent law signed in 2023

0:25

expands regulations and reporting

0:27

requirements for cosmetics manufacturers

0:30

, giving the FDA greater insight

0:32

of the industry . Today , scott

0:35

and I are joined by John O'Malley

0:37

, an associate broker with CRC Group's

0:39

Minneapolis Office , where he specializes

0:41

in product recall exposures , as

0:43

well as Chris Martin , also a casualty

0:45

broker with our Minneapolis office

0:48

, specializing in product recall . They're

0:50

going to talk with us about how the Modernization

0:53

of Cosmetics Regulation Act

0:55

, also known as MOCRF , may

0:58

impact the cosmetic sector . This

1:00

is the Placing you First podcast from

1:02

CRC Group .

1:03

This podcast features news and insights

1:05

from a vast knowledge base of over 5,100

1:08

associates who write more than $35

1:11

billion in premium annually .

1:12

Plus , we give you the latest information on

1:14

what's happening at CRC . This , this

1:17

, is the Placing you .

1:19

First podcast and now the hosts

1:21

of the podcast , Amanda Knight and

1:23

Scott Gordon .

1:24

Welcome to the podcast . It's good to have you

1:26

both back .

1:27

Thanks so much for having us .

1:28

Thank you , yes , thanks , for being with

1:30

us and we're going to launch right

1:32

into it , guys . So , as of 2024

1:35

, the US beauty and personal care

1:37

products market worth is estimated

1:40

at $93.74

1:43

billion and it's expected

1:45

to reach more than $106

1:48

billion by 2029

1:50

. It seems like a law change in this

1:52

area could be a big deal . Is

1:54

that right ?

1:55

Yes , certainly it could be a big deal

1:57

within any industry when

1:59

there's regulation in law changes , certainly

2:02

for the cosmetic industry . In this law

2:04

in particular , manufacturers , processors

2:07

and distributors will now be responsible

2:10

for registering their products and facilities

2:12

with the FDA , as well as adhering

2:15

to other requirements . So whenever

2:17

we see increased regulations and

2:19

oversight , we often see this

2:22

lead to higher risk of costly

2:24

recalls .

2:25

So what specific requirements

2:27

does Mocha

2:29

, the Modernization Act , impose

2:32

on cosmetics manufacturers , processors

2:34

and distributors that maybe they didn't

2:36

have to adhere to before ?

2:39

Yeah , I can jump in on that one . The

2:41

Act creates new reporting and registration

2:44

requirements and good manufacturing processes

2:46

, as well as new labeling and

2:49

documentation rules . Those

2:51

are major changes for cosmetic manufacturers

2:54

and processors . Before the

2:56

passage of Mocha , cosmetic

2:58

manufacturers had few reporting

3:00

, registration or labeling requirements

3:03

and past product recalls were

3:05

primarily based on consumer reports

3:07

. So now , for

3:10

the first time , manufacturers , processors and

3:12

distributors will all

3:14

be responsible for registering their

3:16

own products and facilities with

3:18

the FDA . And I think another

3:20

good thing to kind of frame

3:23

this a little bit is that the

3:25

FDA receives about 5,000

3:27

reports each year about health

3:30

problems related to cosmetic products

3:32

. So under this

3:34

new law the agency now is going

3:36

to have updated instructions for

3:38

reporting these types of adverse

3:40

events . So to the extent

3:43

that any of those didn't

3:45

get previously reported , they

3:47

sort of now will all have to . So

3:49

just by that math alone

3:51

you can see that the increase

3:54

of likely recalls is going to

3:56

be there .

3:57

I mean a lot of this compliance is new stuff . So

3:59

, historically speaking , have cosmetic

4:02

manufacturers or distributors typically

4:04

employed risk managers or other

4:07

people responsible for quality compliance

4:09

. Who does this responsibility

4:11

for compliance usually fall to ?

4:14

Most likely . Many of the companies

4:16

have quality control departments in place , Probably

4:19

to make sure their products are safe , what they are

4:21

going out the door , so probably

4:23

pretty hard to sell a green lipstick

4:25

when it's supposed to be red . Outside

4:28

of this , I'm sure larger companies might have

4:30

dedicated risk managers that might be

4:32

able to help them and walk them through

4:34

things like this , but probably for

4:37

the majority they're going to be responsible

4:39

to make sure they're in compliance just

4:42

on their own , and I think one of the

4:44

benefits of having a product recall policy

4:46

in place is they can utilize the

4:48

crisis consultants which are provided

4:51

within the policy to

4:53

help them and get their expertise

4:56

in following these new regulations

4:59

that are passed .

5:00

Well , when we raise a risk , we also want

5:02

to talk about how to mitigate it . When we can

5:04

. We've just mentioned the crisis consultants

5:07

. But outside of the

5:09

ability to do pre-incident consulting

5:11

work or assist with some

5:13

sort of incident after the fact , what

5:16

is the role of insurance in these

5:18

scenarios for cosmetic industry companies

5:21

?

5:23

Yeah , so the product recall , product contamination

5:25

insurance space is

5:27

definitely willing to ensure

5:29

cosmetic risks and

5:32

those options are there to mitigate these

5:34

manufacturers and distributors' exposure

5:37

. So product recall coverage

5:39

can help them protect from

5:41

the financial fallout of a

5:43

recall . It's primarily a first-party

5:45

coverage , you know coverage can definitely

5:47

vary by policy but generally recall

5:50

insurance covers I guess I'll

5:53

list a few of the major categories

5:55

that it covers but it

5:57

would cover the cost to replace the

5:59

recalls or contaminated products . It

6:02

would pay for business interruption or

6:04

loss of gross profit that stems

6:06

from a recall or contamination event

6:08

, rehabilitation expenses

6:11

, which would be things that

6:13

a manufacturer or distributor

6:15

could do to get their level of sales

6:17

back to where it's supposed to be before the

6:20

incident occurred . So those

6:22

could be things like increased advertising

6:25

or discounts to key

6:27

customers that have been affected

6:29

, promotions , those types of

6:31

things . It covers third-party

6:34

recall liability , which would be kind

6:36

of , I guess , what's usually termed as

6:39

compensatory damages

6:41

that we would cause to any third

6:43

parties . And

6:46

then you know back to the consultants

6:49

and you know that

6:51

type of thing as well as crisis response

6:53

. So like some help consulting

6:57

and corresponding with them in

6:59

the wake of one of these incidents occurring .

7:01

You know , as you were talking about

7:03

those different elements of coverage

7:06

that can really make a difference . I was

7:08

. I don't know if y'all saw this on the news Maybe we follow

7:10

different people on Instagram we probably

7:13

do but this

7:15

made me think of one I saw recently and I won't

7:17

name any names , but there was a large

7:20

cosmetics company that

7:23

somebody on TikTok

7:25

claimed that their lotion

7:28

or one of their products attracted wolf spiders

7:30

and the internet lost

7:32

its mind because

7:34

of this accusation that this

7:36

cosmetic was attracting spiders to people

7:39

. The company ended up having to like come

7:41

out and refute this and know

7:43

we , you know , our product does not attract spiders

7:45

, because everyone was losing it . Situations

7:48

like that made me think of man . I really hope they

7:50

had a good insurance policy place

7:52

.

7:54

And that actually brings

7:57

up a very , very good point

7:59

that I forgot to mention , which is

8:01

another major category of coverage

8:03

, which would be adverse publicity

8:06

coverage . So that fits

8:08

right in there . So that would be the kind of

8:10

situation where there is publicity

8:13

out there , whether it's , you

8:15

know , some kind of newspaper

8:17

, tv , internet , you

8:19

know even the FDA itself in

8:21

some cases , but publicity

8:24

that suggests that there's something wrong with

8:26

our product that could cause injury or harm

8:28

and that has an actual effect

8:31

on our business interruption

8:33

or whatnot , even if it's does

8:35

not prove to be true . So that's

8:38

another coverage in the policy .

8:39

That seems highly relevant to me , especially

8:42

for this sort of company

8:44

the cosmetics crew because

8:46

I don't know if you have daughters

8:48

or girls old enough to care

8:50

, but these makeup tutorial videos

8:52

and like it's a whole thing , guys , and

8:55

you could very easily you know , if

8:57

you're an influencer on TikTok or whatever all

8:59

the kids are doing these days those

9:01

things go viral quickly and

9:03

kids , everyone watches

9:06

these things like I can see how that would be highly

9:08

relevant specifically for this industry

9:11

.

9:11

I definitely have a daughter who's

9:13

you . I can't even remember what product

9:15

it was , but she used something the

9:18

way that she was not supposed to use it and ended up

9:20

making her face sting for 10

9:22

minutes . Now I , you

9:24

know , I did not want to , you

9:26

know , sue anyone or I kind of thought

9:29

that was . That was like a very

9:31

teachable moment and you

9:33

know , sort of a what they would call

9:35

a natural consequence , but you

9:38

know , but I can definitely see how it's a problem .

9:41

You know , I was out over the weekend

9:43

with family and we ended

9:45

up in one of the retail stores

9:48

, one of these large cosmetic companies

9:50

, and the sheer volume

9:53

and number of options and by

9:55

the name , I couldn't tell what some of them were like . There

9:58

are just a lot of things out there , products

10:00

that I know didn't exist to three years

10:02

ago . So it seems like not

10:05

only is it growing , but the different number

10:08

and types of products like , obviously

10:10

, the more you have , the more chance there is for something

10:12

to go wrong , right ? So if there was ever

10:14

a time for a cosmetic company , large

10:16

or small , to invest in

10:19

some quality product recall insurance

10:22

, now seems like a great time to do

10:24

that . So , knowing that these companies

10:26

previously didn't have to register with the FDA

10:28

, is product recall coverage

10:30

that is something that they're used

10:32

to buying ? Has this been on their radar

10:34

? Or is there work for agents and brokers

10:36

to do around ? Hey , cosmetic

10:39

companies , this is coverage you now want

10:41

to invest in in light of these FDA changes

10:44

.

10:44

I definitely think any company that manufactures

10:47

a product definitely has an

10:49

exposure and they maybe maybe

10:51

they don't know it's available , but I'm sure they've

10:54

thought about product recall before , so

10:56

maybe it's just not something they know about . Maybe

10:59

it's just not on their top list of insurance

11:01

to buy right now . I think

11:03

for agents and brokers , I think the work lies

11:06

in creating awareness , making

11:08

sure every manufacturer and processing

11:10

distributing client knows that

11:12

this coverage exists .

11:14

Yeah , and I think you know . I

11:16

think two things can be true . I think you

11:18

know we definitely place this

11:20

coverage for a number of cosmetics

11:22

manufacturers and distributors now

11:25

and I

11:27

definitely think a majority

11:30

of them do not buy it . So

11:32

, you know , while we're placing these

11:34

policies already and a lot

11:37

of them see the exposure and see

11:39

the value in the policy , I

11:41

definitely think a lot of them , you know

11:44

, aren't there yet and

11:46

this is probably going to be a big

11:48

difference maker , because I really think you

11:50

know that that responsibility shift that the

11:52

FDA is going for is going to be meaningful

11:55

. And you know , when they

11:58

change rules like this and

12:00

make new processes and have

12:03

responsible party requirements

12:05

and all those types of things , they

12:08

definitely increase their presence

12:10

in the space and that will usually lead

12:12

to more recalls .

12:14

Well , and at CRC Group you know we pride

12:16

ourselves on being specialists that can get

12:18

the job done for our retail partners . How

12:20

can partnering with a CRC group producer

12:23

help agents with cosmetic

12:25

industry insurers ?

12:26

Yeah , that specialization is key

12:28

. I think being a specialist

12:31

means that we're trying to stay on top of

12:33

market trends and changing regulations

12:35

, just like this . So we strive

12:37

to do that and we want to get ahead and advise

12:39

our retail partners accordingly . I

12:42

think that all falls under being a specialist in

12:44

this particular coverage .

12:45

Yeah , and just

12:47

being in the space between John

12:50

and I and our other CRC

12:52

partners , we've got a lot of experience

12:54

and knowledge in this space and a lot of time with

12:57

the marketplace evolving

12:59

and coverage evolving , so

13:02

I think that's a lot of value

13:04

to bring to it .

13:05

I always learn a lot . I didn't know what Mocha

13:08

was . Amanda sent

13:10

me the podcast outline

13:12

and I was like Mocha , are we doing

13:14

a podcast on a Godzilla monster

13:16

? I didn't

13:18

know what it was . So thanks for

13:20

enlightening us and I guess we're

13:22

done with like all the nuts and bolts of this

13:24

podcast . But would you guys like to do something

13:27

a little fun before we leave ? Sure , always

13:29

.

13:29

I knew it .

13:30

Well , you're in luck because Amanda has crafted

13:32

this wonderful segment we like to call

13:34

Rapid Fire , and

13:37

this is just . We're going to ask you questions and you just

13:39

tell us the first thing off the top

13:41

of your head and our first rapid

13:43

fire question today is if you could

13:45

time travel , would you go

13:47

to the past , the future

13:49

and why ? And I specifically

13:51

want to know what year it

13:54

would be if you go to the past or

13:56

the future .

13:57

I would say . So I'm going to answer that

13:59

I would go to the past . And

14:03

the thing that immediately

14:06

pops into my mind is the

14:08

second back to the future

14:11

movie , when he

14:13

gets a hold of , like the sports almanac

14:15

from like 19 , whatever , and

14:18

you could go back and bet

14:20

on the outcomes of the Super Bowl and

14:22

you know , and the World Series and things

14:24

. So that seems like a great

14:27

call . So I go

14:29

to the past .

14:31

That's funny . You say that , chris . I actually was

14:33

thinking the exact same thing , and

14:36

the reason why I would go to the past

14:38

as well . I think having

14:40

the future unknown is just kind of cool in

14:42

itself . So I don't think I want to go to the future

14:44

any quicker than I already am .

14:47

I feel the same way .

14:48

No one wants to go to the future . Nope

14:51

, I have it . I don't think have we had anyone

14:53

want to go to the future , not one person . Nope , nope

14:55

, no . But I also love

14:57

that , instead of like going back and like steering the Titanic

15:00

away , you know saving lives or

15:02

killing Hitler that you guys want to go back and make

15:04

money with

15:08

the sports almanac . I mean you

15:10

said the first thing that popped

15:12

, and

15:18

it's the first thing that comes into my mind too

15:20

. It's like how can I profit .

15:21

It's not the only thing , but it was the first thing

15:23

You'd be saving orphans along the way Right

15:26

after I make that back Give them all their

15:28

own houses .

15:29

You've got tons of money . You can change

15:31

the world . Okay , and our

15:33

second question in rapid fire is what's

15:36

the best piece of advice you've

15:38

ever received ?

15:40

I don't know , I think I don't

15:42

know . It makes me giggle . I think my father-in-law

15:44

tells all of us

15:47

quite often to

15:49

make sure that we throw the first punch . So

15:53

always throw the first punch , I

15:55

think , beyond the offensive . Yeah , that's

15:58

pretty good .

16:00

I think the best advice I ever got was

16:02

probably just listen

16:04

before you speak . That's

16:06

always steered me

16:09

the right way .

16:09

Scott , what about you ? I want to know your best advice

16:12

.

16:12

I don't know . I like what Gandalf

16:15

said in Lord of the Rings . He

16:18

said Frodo's like

16:20

I wish none of this had ever happened to me . And

16:22

Gandalf said so do all who

16:24

live through such times . But

16:26

that's not for us to decide . All

16:29

we can decide is what to do with

16:31

the time that is given to us .

16:33

There you go . Easy for Gandalf

16:35

to say .

16:36

Right , he was a wizard .

16:38

Right .

16:39

My favorite is probably

16:41

from my dad . I was a kid

16:43

and I mean , it's something we've

16:46

all heard . But I have to tell myself all the

16:48

time , even as an adult don't sweat the small stuff

16:50

. In the end , those small things don't

16:52

matter . Unless of course it's like

16:54

a small thing in your cosmetic

16:56

that's going to cost you a bunch of money

16:58

, Right ? You didn't catch it .

17:00

Bring it for a whole cycle , unless it's

17:02

Wolf Spiders .

17:03

Wolf Spiders . Unless it was a Wolf Spider , in

17:05

which case you better sweat that . Run for

17:07

your lives , yeah , Well

17:09

, thank you both for being here . We

17:11

love having repeat guests . If

17:13

John and Chris sound familiar , they have

17:15

also been guests on our episode

17:17

about changing FDA rules for

17:20

farmers and food producers , so

17:22

if you have not given that one a listen , definitely

17:24

go back and do that . If you're a listener

17:26

, we appreciate you too . Providing

17:28

current insights into the marketplace is just one

17:31

more way CRC group is placing

17:33

you first . Don't forget to subscribe

17:35

and share .