The automotive industry is big business. And in the globalised world, automotive components are increasingly made by a small number of companies for a large volume of cars – which can be bad news when it comes to recalls.
“The number of recalls has grown, but more importantly the size of the recalls has grown,” Christof Bentele, head of global crisis management at Allianz, told Insurance Business. “And the reason for that is that these days, component parts don’t go just in a car, they actually go in various platforms of the same OEM (Original Equipment Manufacturer).”
OEMs may supply components to a number of sub-brands, which means a single component type can very quickly permeate the industry.
“That’s great for the firm, but when we have an issue with the component part it’s not so great,” Bentele said during an interview at the Risk Management Society’s annual conference in Philadelphia, USA, last week.
“Suddenly you have [the component] everywhere, and that is the reason why those recalls are much larger these days than they were 20 years ago.”
In the hyper-connected social media age, where information travels fast and a product recall can make a significant dent on a company’s reputation, elements such as crisis communications, rehabilitation costs and first-party loss or profits are all important factors and all part of the Allianz package, Bentele explained.
The insurer has been writing automotive recall insurance since the 1970s, and today is one of the largest automotive recall underwriters in the world, though the recall market in terms of the number of insurers remains fairly small.
The firm writes “basically every tier one supplier in Germany, France, Italy, and Spain,” and is growing its expertise into the US, Canada and Asia. “These are the three main growth markets for standalone automotive component recall insurance,” according to Bentele.
Having been collecting data on this type of insurance for several decades, Bentele said Allianz is able to offer precise pricing, which is “great for clients… and good for brokers, because they don’t have to come up with the crystal ball.”
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