We recently reported about an overall decrease in the number of product recalls. However, we also pointed out the two exceptions to that are products in the automotive and food categories. Both saw substantial increases in 2016.
U.S. food recalls have nearly doubled since 2002. The National Highway Traffic Safety Administration reports that automotive recalls in 2015 numbered 51 million. So what’s behind this trend?
We live in a smaller world now that technology brings once distant countries closer. Suppliers are no longer located in the next town or just a few states away. Manufacturers dealing with suppliers on the other side of the world face challenges in having orders fulfilled properly. This is especially true with regard to component parts.
Additionally, if a single item fails, it could be a component already in multiple products, in multiple locations, and multiple cultures. For example, a single ingredient could trigger a product recall. But multiple suppliers and distributors of a wide range of products could use that one ingredient. This would account for multiple product recalls.
More stringent safety rules and better methods of detection also come into play. Determining when corners are being cut or when manufacturers make mistakes is easier than in the past. Fewer products slip through detection now and are caught earlier.
Does this rise in recalls affect you? Well, it translates to an increase in insurance claims. That in turn means the payout potential is much bigger, which affects the cost of Product Recall insurance.
It’s estimated that approximately 75% of the 250,000 U.S. manufacturing companies do not have a Product Recall policy, only Product Liability. The rising trend in product recalls offers them an opportunity to examine adding Product Recall insurance.
Product Liability insurance covers claims made for injuries and damage incurred in the use of the goods or products. Product Recall insurance covers the financial loss to the business. A recall can result in a loss of customers and contracts. Companies can go out of business because of a recall.
Still not sure what all this specifically means for you? Give us a call at 800-622-7370 with your questions. We’ll help you determine which policies offer your business the most protection.
Source: Jacquelyn Connelly. “Why Product Recalls Are on the Rise—and Why You Should Care.” www.iamagazine.com. 21 Aug. 2017.
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