A toymaker ponders product liability. Plus, how to bolster customer interaction online.
Having product liability insurance, which covers your costs in the
event of a lawsuit, may help you sleep nights. Many trade associations,
including the TIA, offer special insurance packages for members. Rates
vary depending on the size of the company and what you're selling:
Expect to pay more for a child's flotation device than for a rubber
ducky. Big toymakers like Mattel (NYSE:MAT) and Hasbro (NYSE:HAS) pay
$1 million or more annually in product liability insurance, while small
toy companies pay an average of $7,500 a year, estimates Benjamin
Thrush, vice president of business development for insurance broker Hub
International Northeast (NYSE:HBG), which partners with the TIA.
Of course, the best way to mitigate your risk is to make darn sure your
product is as safe as possible and will be used as intended. In
addition to required labeling, consider including a warning to parents
about the danger to younger siblings, suggests Kimberly Thompson,
director of Kids Risk, a research project at Harvard's School of Public
Health.
You may also be able to diminish your product's object-of-desire status
through design and packaging. "If a toy is meant for an older kid, it
should look like it's for an older kid," says Joan Lawrence, vice
president of standards and regulatory affairs at the Toy Industry
Association. "You don't want to use primary colors or a character
familiar to toddlers." Unfortunately, even the least SpongeBob-esque
approach imaginable can't guarantee little kids won't find your product
compelling. So extensive product testing and design reviews are
crucial. If, in a controlled environment, three-year-olds still grab
for your toy, make alterations--or make something else.
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