Product recall insurance guide
A product recall can be catastrophic to a business, both financially and reputationally. Product recall insurance can provide cover to safeguard a business.
Product recall insurance helps safeguard a business from the financial impact of a recall, specifically the first and third-party costs associated with identifying and addressing the issue, conducting the recall and keeping the business operational.
Recalls of any kind can impact cash flow, squeezing a company’s ability to pay staff, purchase raw materials or even continue production. While many companies have adequate protection from third-party lawsuits, they often do not have sufficient protection for their own costs.
In the guide, you'll learn:
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What happens during a product recall
A product recall happens when a manufacturer becomes aware of a safety issue in their product and requests it to be returned from the consumer or removed from shelves. The safety issue could be real – in that, it has already, or would, cause the consumer bodily harm - or the issue could be threatened or alleged by a member of the public.
- Understanding the cost of a recall There are many costs involved when a product safety issue is discovered. Along with the costs of withdrawing the product from consumers, there are also costs associated with identifying what went wrong and remediating it, as well as keeping the business afloat.
- Industries most often hit by product recalls A recall can hit any manufacturer or distributor regardless of the sector. Recalls of food & beverage products and certain consumer packaged goods (CPG) tend to garner mainstream attention depending on the severity of the issue.
- How a policy works Product recall insurance helps safeguard a business from the financial impact of a recall, specifically the first and third-party costs associated with identifying and addressing the issue, conducting the recall and keeping the business operational.
- Contamination considerations Recall insurance is particularly useful for those manufacturing or distributing food & beverage products. There are aspects of this industry which make it a very challenging business environment and companies operating in this area are vulnerable to damaging product and brand issues in various ways.
- The reality of reputational harm Negative publicity surrounding a product recall can cause significant reputational damage and a long-lasting impact on consumer trust.
- Policies in action: Claims examples A few claims examples involving food contamination, bankrupt suppliers and faulty raw materials.
- Common misconceptions Manufacturers may not be aware of the value of product recall insurance or its role in risk transfer. We look at some of the most common objections to product recall insurance.