What’s the product? Product Recall insurance.
According to an analysis that was done by Allianz Global Corporate & Specialty, “defective product-related risk is the single largest driver of liability claims” with losses from product recalls being the major contributor. Losses from this sector have cost insurers more than $2 Billion in just the last 5 years. Thus, this is an area that has the potential to cause significant hardship to a risk that lacks the proper coverage.
It is easy to remember some of the more noteworthy claims in the recent past. Issues such as the recall of the Samsung Galaxy Note 7, the Takata airbags that impacted 19 auto manufacturers (60,000,000 vehicles) and the faulty ignition switches in GM vehicles.
These three issues alone cost an estimated $34 Billion !!
In a recent article written by Patricia Harman that appeared in Claims magazine (PropertyCasualty360.com), Christof Bentele (AGCS head of global crisis management) stated the reason for the tremendous increase in the number of product recalls:
“product recalls have risen steadily in the past decade” / “tougher regulation and harsher penalties, the rise of large multinational corporations and complex global supply chains, growing consumer awareness”.
Product Recalls have actually affected a wide range of Business Industries. These include:
- Automotive / industrial supplier
- Food & Beverage
- IT / Electronics
- Manufacturing / packaging
- Transportation / logistics
- Domestic appliances
- Engineering / construction
The analysis by AGCS went on to state that the estimated cost of a significant recall can exceed $12,000,000.
It is easy to discount the potential exposure for your clients by stating “my clients don’t have this type of an exposure”. Maybe they don’t but doesn’t it make sense to at least ask the question? You may just be surprised but if they don’t have the exposure, you can feel confident that you asked the question. That, my friends, is a big part of what E&O prevention and the use of an Exposure Analysis checklist is all about! Asking the right questions and documenting the responses.