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About Airmic
Airmic is a members’ association supporting those responsible for risk management and insurance within their own companies. We have nearly 1200 individual members who represent over 450 companies.
Airmic is a members’ association supporting those responsible for risk management and insurance within their own companies. We have nearly 1200 individual members who represent over 450 companies.
What is product recall insurance, who is it for, what should companies look out for when buying cover and how can you best prepare for and manage a recall? Garbhan Shanks of Michelmore's explains all.
Product recall insurance covers manufacturers and distributors for the costs associated with recalling defective products from the market. Such costs can include customer notification expenses; transport and storage costs; the costs of disposal/destruction of the defective goods and so on. Some policies also provide cover for public relations and crisis management expenses, which can be crucial to a business's continued survival where a product recall gives rise to substantial negative press interest; you might recall that back in November 2017, IKEA was forced to recall 29 million chests of drawers after a toddler in California was said to be the eighth child killed by the drawers toppling over.
Who is product recall Insurance for?
Manufacturers and distributors of all types of product should assess whether they ought to have product recall insurance. Other companies involved in the supply chain - for example, storage and transport companies - should also check their contractual arrangements to see if they could be liable for the costs of a product recall.
Research conducted by insurer Allianz in 2017 found that automotive companies are the most likely to make claims under product recall policies, followed by food & drink and domestic appliance manufacturers; this is not surprising given the obvious risk to consumers posed by such products if defective. Perhaps more surprising is the finding by Allianz that the average cost of a product recall claim was €12.4m in the automotive industry and €7.9m in the food industry.
It is a common misconception that only large manufacturers need to take out product recall insurance; any size company can be affected by the need to recall an unsafe product, and it is the smaller companies which may struggle to meet the costs of a recall without the assistance of insurance.
Five things to look for when buying cover - advice from Michelmores' insurance lawyers
Five things to consider in recall management - advice from RQA Grou
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