In simplistic terms Product Recall insurance covers the costs of; and the costs associates with, the necessary recalling of a product from the market as a result of safety issues concerning the product.

Generally speaking, the cost of recalling a product from the market can be enormous but, with product recall insurance most if not all the costs are reimbursable. In fact some underwriters policies allow for advance payments to help you meet the costs of recalling the product(s) which could include having run a national advertising campaign.

Not only does product recall insurance cover the costs of recalling a product but, it can help mitigate a drop in sales, loss of customer confidence, loss of hard-won retail shelf space and loss of critical supply contracts by providing you the you the necessary funds to get things happening fast – customers will see you’re serious about safety issues and that you operate professionally and had the foresight to protect your customers by taking out product recall insurance. 

Product recall insurance covers a wide range of costs associated with the recalling of a product including the costs of identifying where products are, and recovering them from wholesalers, retailers and other links in the chain.
Product recall insurance is essential for anyone engaged in a product supply chain including a manufacturer, supplier, distributor, importer or exporter - no matter how big or small.

Even if you are a tiny player operating in your spare time from home such as an e-space [eBay] seller distributing products over the worldwide web – the cost of recalling a product could bankrupt you

No. Ordinary Product & Public Liability insurance won’t usually cover the costs of recalling a product so, if you’re a manufacturer, supplier, distributor, importer or exporter of any type of product, it’s imperative you give proper consideration to taking out Product Recall Insurance for thee separate type of risk that it is. 

But, at the risk of adding to the pain and confusion, unless the recalled product can be repaired and/or replaced you could also be required to refund customers the purchase price of the product and; even worse you might be required to compensate customers for their time, effort and inconvenience in returning the product.

While, product recall insurance won’t ordinarily cover refunds unless your product recall insurance policy includes an endorsement covering refunds [usually negotionable with underwriters] it is more likely that if you have the correct ‘product liability’ insurance cover that that will pay the refunds, repair costs and compensate those who make successful compensatory claims against you for the injury or loss incurred as a result of the product.

This is why it is imperative to have an expert insurance brokerage such as RGIB arrange your product insurances – you have to get the right cover so that you’re not doubling up or even worse not covered for the important things at all.

An affordable solution is a combined product insurance package that includes;

• Product Liability Insurance;


• Public Liability Insurance; and


• Product Recall Insurance, all in one package from one underwriter.

Absolutely, yes; any product can be recalled if found to be defective or dangerous infact, most governments have the power to compulsorily recall products even on a suspicion that a product poses a danger.

The primary aim of recalling a product is;

• to minimise the risk of injury to the public by recalling the product as quickly as possible;



• to get back as many of the faulty products as possible;



• to minimise the cost and inconvenience for the consumer and the company.

Consider the trouble you could get in if someone was injured as result of using your product and all the while you knew about the its potentially dangers but, did nothing about it – you could face criminal charges in addition to claims for financial compensation.  

Take for example a case concerning an importer/wholesaler of soaps and exotic oils who receives feedback from a number of retailers that some of their customers had reported skin irritations from the soap’s use; but does nothing about it. Then after a while someone suffers a severe allergic reaction to the product resulting in a period of hospitalisation.

The claim for compensation as result of the importer/wholesaler’s failures could be enormous; after all, the product could have been recalled for testing and but, for the importer/wholesaler’s failure to recall the product the customer suffered injury and loss.

As mentioned earlier; even if you are a tiny player operating in your spare time from home such as an e-space [eBay] seller distributing products over the worldwide web – the cost of recalling a product could bankrupt you.

Recalling a product is not a simple matter; especially if the product has already been distributed throughout a network of retailers and resellers; and even all ready sold to customers, many of which wont have left any record of contact details with the retailer or reseller.
 
The obligation of recalling a product whether voluntarily or as directed by an authority doesn’t just stop at your ‘best attempts’, it goes much further than that. You will most likely be required to run national advertisements warning the public of the potential dangers concerning the product and requesting the products be returned to you as supplier and/or the retailer/reseller where they purchased the product from.

Add to that the detrimental impact on your business and product reputation after having to run nationwide advertisements affectively declaring your product to be ‘dangerous’ – the long term affects could be huge; the publicity might have to include;

• display signs in shops that sold the product;



• ask relevant organisations to publicise the recall in their newsletters, e.g. ToysR’Us might publicise the recall of a toy;



• advertise in magazines in which the product was advertised;



• ask Ebay or any other e-seller‘s site used to sell the product on to display the notice of recall;



• advertise in daily or community newspapers;



• issue a media release to newspapers, radio and television;



• advertise on radio or television;



• advertise in retailers' mailers. Supermarkets, retail chains, department stores often send mailers to every household.

The costs could be huge but, with Product Recall Insurance these types of costs are recoverable, and under some policies you might be entitled to advance payments to help you meet the costs of advertising the recalling of the product – a positive step in the right direction and shows consumers you’re serious about safety issues.

In fact not only does product recall insurance cover the costs of recalling a product but, it can help mitigate a drop in sales, loss of customer confidence, loss of hard-won retail shelf space and loss of critical supply contracts; take for example the controversy surrounding some brake and accelerator issues concerning a large number of Toyota manufactured vehicles;

[the same laws and principles apply to sole operators and small firms as they do   large firms] where substantial claims for injuries, compensation and            consequential loss could arise as a result of some fault of a component of the   overall product – the same could happen to you as supplier of a product and/or a product’s component!

Toyota is a massive corporation with massive financial capacity to meet the immediate costs of dealing with the recall and repairing and/or replacing the defective parts. They also have enough ‘product recall insurance’ to lessen the blow and ultimately recover the costs they have had to bare.

Have you got the financial recourses to deal with a recall of your products? – indeed, if you have product recall insurance you won’t have a problem – if you haven’t you could go bankrupt.

As mentioned; as soon as become aware of a possible defect in a product that may make it unsafe you will need to consider recalling the product from the market.

As a guide to assessing the whether or not a recall is necessary;

• gather all available information on the defect; arrange testing, talk to buyers/customers who have complained;



• identify the number of goods/products affected (models, batches etc’)



• locate the goods/products; where they have been distributed (warehouses, retailers, customers and the like)



• assess the degree of danger; injury potential and likelihood of injury



• consult others who may have received similar complaints;



• contact the Ministry of Consumer Affairs for advice consumeraffairs.govt.nz

With Product Recall Insurance these types of costs are recoverable, and under some policies you might be entitled to advance payments to help you meet your obligations – without recall insurance the costs will have to come out of your own pocket.

You should act quickly and with delay contact the Ministry of Consumer Affairs on www.consumeraffairs.govt.nz  and by phone.

It would also be worthwhile contacting Consumer NZ [New Zealand’s leading independent consumer organisation] who has sophisticated facilities to help out in situations like this. www.consumer.org.nz ; again also by phone.

Especially if it is serious, but in any event you’ll need to take immediate steps to;

• Stop supply, production and distribution of the product; and notify your insurance broker immediately;



• Identify which models/ batches of the product are affected (e.g. by serial numbers, batch marking). Find out when these were produced and where they have been distributed;



• Notify distributors, wholesalers, importers, agents and retailers quickly by phone, email and fax - and in writing;



• Notify individual customers directly of the recall where records are available;



• Prepare and undertake a publicity program to ensure all users of the product are aware of the recall;



• Arrange to destroy the faulty products or to store them securely until they can be made safe.

Right here because RGIB is one of New Zealand’s leading independent insurance brokerages specialising in business insurance products and other related classes of insurance including product recall insurance.

We’re considered a leader in the field of product recall insurance and related product liability insurances having been a pioneer in the development of recall insurance many years ago. We’re expert at it.

We arrange more than NZD$5.5 Billion cover for over 6,000 business, liability & indemnity clients through-out the Australasian region and have access to a wide range of New Zealand & International insurance companies offering specialised insurance products.

No matter how large and complex or how small and simple you’re insurance requirements might be; we welcome every new client with a desire to help and will always offer a professional, efficient & fast services on the best available terms.

All quotes and enquires are free; please refer to our contact details below.