Although product recalls such as those at Toyota have recently received a lot of media attention, recalls are nothing new.
“As far as consumer safety goes, whether it is consumer products or food products, there is certainly a much higher profile and increased number of recalls just because of the environment we’re in right now,” says Bernie Steves, managing director of Aon Risk Solutions Crisis Management Practice. “Clients are being faced with heightened risk and exposure. Fortunately, the insurance marketplace has learned over the years to respond in a more affordable fashion and with a broader scope of coverage than it has been able to in the past.”
Smart Business spoke with Steves about how product recall insurance can help your company should you find yourself facing a recall.
How often do product recalls happen?
There have been many high-profile recalls, particularly in the automotive area, over the last 12 months. From a media standpoint, a lot of that relates to the Toyota recall. There has been a lot of attention focused on it and a lot of concern, but it is something that has been occurring all along.
In reality, there have been more than 390 million car, truck or bus recalls since the National Traffic and Motor Vehicle Safety Act was passed in 1966. There are an awful lot of recalled automotive products out there, whether they are cars or component parts. Generally, those are all safety related defects, or they don’t meet federal safety standards.
What should companies know about product recall insurance?
The biggest change is that, in the past, it’s been a specialized type of insurance. It continues to be specialized, but the insurance marketplace has gained considerable knowledge in the last 10 years since it has been offering this type of coverage. The market has really homed in on what the exposures are and how it is underwritten. So the program now is much more affordable for smaller and midsized companies.
In past years, you were looking at minimum premiums and minimum retentions from six figures on up. That really limited those companies that could afford to purchase the coverage.
Today, with minimum premiums as low as $25,000 and deductibles starting at $50,000, it is applicable to a much larger range of businesses.
