Recalling products can be a costly exercise for manufacturers.
There’s not just the cost of recalling and replacing items from retailers and consumers, there are also costs associated with the reputation of the business and the ongoing supply chain to be considered.
In fact, one US study by Lockton said that 80% of the costs of a product recall happen AFTER the items have been taken back by the company and destroyed or repaired.
Find out more about that study here: http://www.lockton.com/whitepapers/Harrison_True_Cost_Product_Recall.pdf.
In these instances, companies must:
· Create a team to manage the crisis
· Take the faulty product off the market
· Discover the cause of the problem
· Manage the public relations
There may also be the prospect of regulatory action under health and safety or food safety regulations. Fines imposed by the courts can be hugely costly for businesses.
Product recalls have affected major names in the past few years
The number of product recalls was at the highest number recorded in 2015 after high-profile cases in the motor and food production industry.
Recalls in recent years have included:
· VW group – Volkswagen, Seat, Skoda, and Audi cars over software fitted which affected the results of emissions tests
· Renault – again after questions were raised about emissions
· Mars – a major international recall of chocolate bars amid fears over customers choking on pieces of plastic
· Top UK retailers – who recalled hoverboards after the UK government warned some unsafe devices had been shipped into the country
· Samsung – who recalled the Galaxy Note 7 after a series of reported fires
Can you insure against it?
Talk to your broker about the potential for buying product recall insurance.
There are specialist products available which cover recall expenses including testing and analysis, the costs of hiring advisors or consultants, advertising the recall, the costs of shipping and storage, destruction of faulty products, and extra staffing costs.
Some policies cover the cost of refunds, repairs, replacements, government recalls, the loss of gross earnings, and the cost of the unsold stock.
Third party liability for financial loss costs is also covered in some policies.
Do you need advice on product recall insurance for manufacturers in Cardiff and South Wales? Call our expert team on 02920 470375, or contact us online here: https://www.severnbay.com/contact/.