Typically in each edition of the Recall Roundup, I share recalls that have recently occurred in the food and drug industry, how it could affect you on a personal and business level, plus some resources to help your business mitigate the risk of recalls in your industry. For this end of year round up, I’ve gathered together a few tools to help you assess your recall risk strategy.
What is Product Recall Insurance and What Companies Should Have Product Recall Insurance?
According to Investopedia, Product Recall Insurance is “insurance that covers the expenses associated with recalling a product from the market.” There are many associated costs when a business must conduct a recall – which are above and beyond regular day-to-day operating expenses – such as customer notification, shipping, disposal, repairs and/or reproduction of the recalled item, not to mention legal costs – depending on the industry. These additional expenses could cripple an unprepared business.
Product Recall coverage should be in the insurance portfolio of any business engaged in the production, distribution or sales of food and drug related ingredients and products or hard and soft good products that flow through a supply chain, regardless of the size of the operation. With increased globalization of product and food manufacturing, plus various countries not holding the same safety standards and practices, news of recalls hits the media daily and it could be only a matter of time when at least one will have an effect on your industry as a whole or your business in particular. Talk with your business insurance agent and closely review what your current liability policies and be aware of what they do and do not cover. In many cases, a separate recall insurance policy could be necessary.
Investopedia.com – What is Product Recall Insurance
CitadelUS.com – How Much Do You Know About Recall Insurance
RuralandGeneral.com – Product Recall Insurance FAQs
What You Should Know About Product Recall Insurance Before You Buy
Here are a few considerations to keep in mind before you shell out money for additional insurance coverage. First be sure you have a clear understanding of your current business insurance policies and the specifics that are covered in it. If you only have general liability insurance, it is very likely that it only covers bodily injury to the consumer of your product and not anything associated with recall issues.
Secondly, you should understand the two standard parts to a recall policy and determine, plus additional areas that could be included. Typical product recall insurance has both first and third party components to it. First party covers the direct costs associated with the recall, such as customer notification, product shipping and disposal. Third party coverage handles claims made by any third parties who may be affected by the recall such as wholesalers, distributors and retailers.
Additionally, some polices may allow for the hiring of a crisis management firm to assist with public relations activities to help rebuild customer trust and brand perception. As new risks emerge in industries, expect insurance underwriters to create more comprehensive and flexible products that respond to the changing supply chain landscape.
Does Your Insurance Policy Protect You During a Product Recall?
Getting the Most Out of Product Recall Insurance
5 Reasons to Purchase Product Recall Insurance
I’ve Got Product Recall Insurance … Don’t I?
Food Product Recalls — Is Your Company Covered?
Product Recall Insurance and Recall Risk Management Tools for Small Businesses
Larger companies may have a comparatively easier time moving through all the steps of an item recall by either tapping into their own reserves or by having an easier time to finding insurance coverage to meet their needs and size of enterprise. But small businesses owners also have recourse. Recently, ACE Westchester – a division of ACE Group which is a multiline property/casualty insurer – announced a new product, ACE Recall Plus for Small Business.
Designed for companies with annual revenues below $25 million, the package includes provision for crisis management services in addition to the recall coverage. Some of the features include lower self-insured retentions and lower limits that usually available. Click here to read more.
Small businesses can also take a closer look at the software that drives driving their supply chain. With better visibility on each step, companies can make more informed decisions faster and remain agile to respond to red flags as soon as they are known, which could either minimize the time frame of or avoid a recall all together. Click here to watch this 13 minute video to see how your ERP system can help you best manage all levels of your supply chain and how it can respond in crisis mode.
Put your current recall risk plan to the test by clicking here to take our brief quiz and find out if your plan is missing an important aspect. If you are ready to take the next step and speak with a solutions expert to discuss efficiency gaps, quality assurance or compliance, we’re here to help. Simply click here to connect with us.