Counting the cost of product recalls
The news recently saw Ford recall 1.2m vehicles due to a fault with their suspension, the cost is estimated to be £140m. In an unprecedented move the UK government has ordered Whirlpool to recall around 500 dryers following a series of fires. Last year, Australian strawberries were in the news after an individual deliberately contaminated some with needles, leading to a nationwide panic and destruction of fruit. These are the big headline recalls, however you only need to go into your local supermarket and you are likely to see numerous notices regarding all sorts of products that have been recalled, including food, toiletries, cosmetics & toys.
If you are a manufacturer, supplier or retailer you might be faced with a similar crisis if your product is found to be harmful. In fact there may be nothing wrong with your product itself but an error in labelling could make your product unsafe. Whatever the reason, recalling products is complex and costly, and of course there are the reputational and replacement costs to consider as well.
This is why many businesses purchase product recall insurance, which is designed to cover the costs and losses associated with a recall. It can even cover precautionary recalls following threats of sabotage or blackmail.
Product recall insurance will respond if your product is harmful to health, however it is also possible to purchase product guarantee insurance, which will respond if your product has a fault that means it does not meet the required specification, it does not have to be dangerous. For example blue baked beans might be covered by a product guarantee policy, whereas toxic baked beans might be covered by both a product guarantee and a product recall policy.
Give our team a call on 01905 21681 if you need advice on product recall or product guarantee insurance, or contact us via the website.