Even with the most stringent quality control and safety measures, any business that manufactures, distributes or sells goods could be subject to a product recall – particularly as supply chains are increasingly complex and global. Regardless of the reason behind a product recall (i.e., safety concerns, contamination, defects, regulatory non-compliance), the financial and reputational impact to a business can be disastrous with long-term consequences. This is where product recall insurance proves invaluable.
What does product recall insurance cover?
A comprehensive policy will provide coverage for a variety of costs that are commonly associated with executing a product recall and navigating the aftermath. These expenses can rapidly accumulate and reach staggering amounts. Product recall insurance will usually include:
- Recall Costs: These are the expenses incurred for removing the defective product from the marketplace, including notification, logistics and disposal.
- Replacement Costs: This coverage includes the costs for materials, labour, storage, shipping and any other overhead required for repairing or replacing the recalled product.
- Business Interruption: If a product recall causes a disruption to your operations, business interruption coverage compensates for the lost income while product sales are suspended.
- Crisis Management: This covers costs for hiring crisis management services or consultants to minimize the negative effects of the recall on your brand and reputation.
My personal experience with product recalls
During my 18 years of experience in the manufacturing industry, I saw firsthand the challenges companies face during a product recall. Operations are thrown into disarray, direct financial losses can be catastrophic and trust that has been built with customers over years-long relationships is weakened.
Now, I am dedicated to helping businesses be prepared to respond quickly and effectively in the face of a recall. In addition to securing a robust product recall insurance policy, I recommend that clients create and maintain a product recall plan which outlines the steps to be taken in mobilizing a response.
Do you have a product recall plan?
In my role with Acera Insurance, I connect with business leaders on a daily basis and, based on my experience, many do not have formal product recall plans. Knowing the exact procedures required to action and manage a product recall is just as critical as having the necessary insurance coverage — time is of the essence during these types of crisis events.
To help businesses stay prepared, I’ve developed a product recall plan template that can guide you through each step of the process. If you’d like to receive a copy of the template or discuss your product recall insurance needs, please connect with me directly.
Stay proactive and protect your business from the unexpected.
Colin Campbell is an insurance broker with 18 years of international business experience in the manufacturing, wholesale and retail sectors. He is committed to working directly with clients to understand their businesses and find the best options for their needs.
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