Tech products sold by Amazon were recently recalled due to explosion risk.
According to the Metro, "The government issued a warning about the products, which were shipped from China, saying they are a hazard."
The Office for Product Safety and Standards said there was "no evidence that an appropriate conformity assessment was carried out before the products were placed on the market ..” the Metro reported.
Michael Lilley (pictured), product recall team leader at CFC, believes this exemplifies the necessity of product recall insurance: “…A lot of these companies are very reliant on their suppliers or someone manufacturing the product on their behalf, and a lot of it is out of their control on that basis, so they could do everything right their end and still be subject to a recall because of a supplied contaminated ingredient.”
Recall activity is a growing trend across Europe.
According to Sedgwick brand protection’s European Recall Index report.: “In 2024, product recalls across Europe exceeded 3,500 in five key sectors for the second consecutive quarter, reaching 3,505 events in Q2 2024.”
Lilley argues there are two types of product recall coverage. “One of them is a contaminated product insurance, which essentially targets any products which are ingestible or topical, so any products that go into or on to the body.”
An additional product recall coverage type might be offered for other products: “this would include sort of automotive products or consumer goods….any products that don’t fall under the contaminated products banner.”
Lilley added: “They’re both standalone policies, so they provide full coverage in respect of balance sheet protection for the client. Clients can get a product recall extension within their liability policies, but they are typically very heavily sub-limited, with small limits.. which is obviously why we put a standalone offering forward.”
Lilley also explained the difference between product liability and standalone recall cover: “It differs from product liability cover, in that product liability looks to cover actual claimant costs… whereas what we're trying to do under a standalone recall policy is protect the manufacturer themselves….”
Product recall coverage is needed across various industries. “Any businesses really within the whole manufacturing chain … on the contaminated product side, that could be anywhere from the grower themselves, such as fresh produce growers, all the way to the end retailer,” Lilley explained. “Similarly, on the product recall side, that could be anyone from a raw material manufacturer, like a sheet metal manufacturer at the start, all the way to an OEM on the automotive side...”
In terms of food product recall, The UK Food Standards Agency (FSA) reported “127 food recalls in 2024, marking a 10% increase from the previous year”, according to OAL Group.
Product recalls are particularly prominent in tech industries. According to GOV.UK, the UK’s Product Safety Database revealed that between April 1, 2023, and March 31, 2024, “The most frequently notified product category on the PSD was electrical appliances and equipment (22.9% of products notified)..”
The report also revealed that “the most frequently notified harm was chemical (22.3% of the unsafe products), followed by electrical shock (17.4%) and injuries (15.8%).”
Recovering from a recall can be an expensive and complex process.
According to Lilley, there are first and third-party recall costs: “let's say there's an oatbar manufacturer who supplies to a retailer in the UK, we cover both first and third party recall costs. So any labour… both on the client and their customer’s behalf, we would pay for.”
There is also the opportunity to offer product and premises rectification: “Once the product is back or disposed of, how much will it cost the client to re-manufacture and redistribute it? And if there’s an outbreak, like salmonella, there could also be a need for full facility cleaning, which can be really expensive,” said Lilley.
Brokers play an essential role in helping companies understand the importance of product recall coverage.
Lilley implores: “A lot of companies are very reliant on their suppliers or someone manufacturing the product on their behalf, and a lot of it is out of their control.”
“There’s a big misconception that clients are already sufficiently covered. They’ll say, ‘Well, I’ve already got a recall sub-limit within my liability policy, so I’m covered,’ but they don’t understand how restrictive it is,” Lilley added.
For brokers, it is about spreading the message: “It's trying to change that perception… so that they understand that if they're not buying this, they really are taking on the risk that they could be going out of business,” Lilley emphasised.
