What is Product Recall Insurance?

If you’re a manufacturer or distributor, then you should consider taking out product recall insurance.

This is because, if your product needs to be removed from the market because it’s faulty or unsafe, then product recall insurance can help protect your business from suffering from severe financial losses and reputational damage.

No matter whether there’s a manufacturing error, an issue with contamination, a product has been tampered with or you’ve uncovered a design flaw, product recall insurance can help safeguard your business.

Which Companies Need Product Recall Insurance?

Businesses in a range of sectors are at risk of facing product recalls. This includes everyone from restaurants and beverage distributors to automotive manufacturers and pharmaceutical companies. In short, most companies who are manufacturers, distributors or are involved in the supply chain in any way may benefit from product recall insurance.

In the modern world, regulatory oversight is only expanding. This means that companies are increasingly falling short of exacting safety and quality standards. Plus, added to this, global supply chains are becoming more and more complex, and there are liabilities for those involved at each stage of the product journey.

For this reason, product recall insurance is becoming more suitable for an increasing number of businesses of all sizes and in most industries.

What Does Product Recall Insurance Cover?

If your product is withdrawn from the market due to safety concerns, then product recall insurance covers the cost of notifying your customers of the recall, the transportation and destruction of the offending product and even brand rehabilitation, among other things.

Overall, most product recall insurance policies cover the following:

• First-party costs that are incurred directly by your business, including:
  • Notifying your customers and advertising the issue to people who may have been impacted
  • The shipping, storage and disposal or destruction of the recalled products
  • The cost of manufacturing new/replacement products
  • The redistribution of the new, safe products
  • The cost of lost sales and business reputation
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• Third-party costs and liabilities to others, including:
  • The costs associated with reputation management, including PR, marketing and promotional activities that can be used to restore customer trust
  • Access to crisis management consultants/experts who can provide advice during the recall process. These experts can also help you if you’re facing pressures from regulators and other suppliers

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Why is Product Recall Insurance So Important?

If you’re a manufacturer, distributor or you’re involved in the supply chain in any capacity, then you should seriously consider whether product recall insurance is right for your business and can help protect you from the risks you face.

After all, product recall insurance can provide you with financial protection if something goes wrong. Remember, product recalls are incredibly expensive.

In fact, research from Allianz has shown that the average cost of a product recall claim is €12.4m in the automotive industry and €7.9m in the food industry. It’s easy to see why this is the case, too. If you remember, back in November 2017, IKEA was forced to recall 29 million chests of drawers from the market. That’s a lot of chests of drawers to take off the shelves!

That said, it’s a common misconception that only large manufacturers need to take out product recall insurance. A company of any size can be forced to recall a product, and smaller companies may find it much more difficult than larger ones to meet the time and monetary cost of this.

How Does Product Recall Insurance Differ From Public Liability Insurance?

Some people confuse product recall insurance with public liability insurance. However, if you currently have a public liability insurance policy in place, then it’s important to understand that product recall is usually excluded from this cover.

This is because public liability insurance is usually only used when there is damage or injury because of the use of a product by a third party. By contrast, product recall is a first-party cover.

Speak to Eximia Broking About Product Recall Insurance

Here at Eximia Broking, our team are experts in brokering bespoke product recall insurance policies for businesses of all sizes. We can help design a policy that suits your level of risk and ensures that you’re supported in the event of a product recall or contamination incident.

So, if you’re considering taking out a product recall insurance policy, put your business in our hands. After all, we’ve been getting it right since 1953. Please get in touch with our team by calling 0114 345 10 20 or emailing info@eximiabroking.co.uk.

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