PRODUCT RECALL MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE - Loss Trends and Product Recall Claims Analysis Risk Mitigation Crisis Management ...
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ALLIANZ GLOBAL CORPORATE & SPECIALTY PRODUCT RECALL MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE Loss Trends and Product Recall Claims Analysis Risk Mitigation Crisis Management
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
IN FOCUS CONTENTS
A product recall is potentially the most risk-laden situation
a company can face. And whether a manufacturer, retailer
or wholesaler, this risk is increasing, as supply chains grow
04 Billion dollar product recall incidents
more complex and the regulatory landscape becomes
more robust. Yet businesses can often underestimate the
impact of a recall and the negative effect it can have in
06 Executive summary
terms of financial and reputational damage, despite the
growing number of large loss events. 08 Drivers of the product recall risk landscape
This report examines current and emerging risk and loss
trends in product recall and includes exclusive insurance
claims analysis. It focuses primarily on the automotive and
10 By the numbers - product recall claims analysis
food and beverage industries, but also incorporates other
sectors. The report also highlights the increasingly important
role of crisis management services, including specialized
12 Eight emerging developments in product recall risk
insurance, in a recall scenario and outlines what can be
done to mitigate the fall-out when an incident occurs. 22 Preventing a crisis – five key steps to managing a recall
All claims values in € originally. All $ US$ unless stated
otherwise. 26 Insurance: financial and reputational recall protection
Allianz Global Corporate & Specialty business scope
Allianz Global Corporate & Specialty (AGCS) is the Allianz
Group’s dedicated carrier for corporate and specialty
insurance business. AGCS provides insurance and risk
consultancy across the whole spectrum of specialty,
alternative risk transfer and corporate business.
Insurance product lines covered include:
– Alternative Risk Transfer
– Aviation (including space)
– Energy
– Engineering
– Entertainment
– Financial Lines (including directors’ and officers’ [D&O])
– Liability
– Marine
– Mid-Corporate
– Property
2 3
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
BILLION DOLLAR
RECALL INCIDENTS
A pedal that caused a car to inadvertently accelerate, a hip replacement device
that led to repeated surgeries and an outbreak of contaminated peanuts that
resulted in a 25% industry-wide reduction in sales. Below are some of the largest –
and most costly – recalls of recent times.
2016 EXPLODING PHONES 2010 HIP HICCUPS 2008 PEANUT CONTAMINATION
Samsung recalled 2.5 million Galaxy Johnson & Johnson subsidiary, DePuy One of the largest food recalls in US
Note 7 phones after users reported Orthopaedics, recalled hip replacement history, triggered by salmonella fears.
flames and explosions caused by devices due to a high level of repeated More than 4,000 products, produced
overheating batteries. surgeries. More than 90,000 devices by over 200 different companies, were
Estimated cost: $5bn+1 had been implanted worldwide. impacted, triggering an industry-wide
Estimated cost: $3bn+4 25% reduction in peanut sales. The
company responsible, Peanut
2015 AIRBAG ERRORS Corporation of America, filed for
One of the largest recalls to hit the 2009 FAULTY PEDALS bankruptcy.
auto industry, expected to result in Automaker, Toyota issued a recall on Estimated cost: $1bn+6
some 60 to 70 million units across at over four million vehicles to fix faulty
least 19 manufacturers being recalled pedals that led to unintended
worldwide. Japanese manufacturer, accelerations. In total an estimated 2005 ARTHRITIS DRUG RECALL
Takata filed for bankruptcy in June 2017. nine million cars were eventually The Food and Drug Administration in
Estimated cost: $25bn+2 pulled back for pedal-related flaws. the US requested the removal of the
Estimated cost: $3bn5 Pfizer arthritis drug Bextra from the THESE EVENTS
market due to side-effects.
2014 AUTO IGNITION FLAWS Estimated cost: $3bn7 COST ALMOST
$50BN
AND OTHER ISSUES
Issues such as ignition switch flaws
meant General Motors had to recall 2004 ARTHRITIS DRUG RECALL
over 30 million vehicles in total Merck recalled Vioxx, another arthritis
through 2014. drug, after a study found that patients
Estimated cost: $4bn+3 who took the drug were more at risk
from heart attacks and strokes.
Estimated cost: $5bn8
1. S amsung’s losses from Note 7 disaster keep mounting, money.cnn.com, October 14, 2016
2. T akata puts worst-case airbag recall costs at $24bn, Bloomberg, March 30, 2016
3. GM’s total recall cost: $4.1bn, money.cnn.com, February 4, 2015 6. 2 016 Emerging Trends in Product Recall and Contamination Risk Management, Aon
4. A s lawsuits climb, J&J may have new hip trauma, Reuters, July 12, 2012 7. T he ten worst drug recalls in the history of the FDA, 24/7 Wall St, December 10, 2010
5. The most expensive product recalls, Bloomberg January 17, 2013; Top 10 product recalls, Time, January 29, 2010. 8. T he most expensive product recalls, Bloomberg January 17, 2013
4 5
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
Tougher regulation brings more recalls: The exacerbating effect of social media: It can
EXECUTIVE
Regulatory scrutiny is increasing, as many be a fast and effective way of communicating
countries implement stricter product safety laws. with customers, but social media can also
Regulations such as the Food Safety exacerbate recall risk. An erroneous post can
Modernization Act in the US means authorities impact the size of the recall and cause
are now far more proactive. In the UK the reputational damage. Social media can even
200+
SUMMARY
number of recalls of food and drink products have a bottom line impact on those companies
involving mislabeled allergens surged by over not responsible. An academic study shows that
60% in 2016 following the introduction of new negative comments on social media sparked by
European Union legislation. And product safety recalls in the automotive sector helped erase
NUMBER OF CLASS
regulation is also increasing for automotive and $7.3m on average from the market cap of an ACTION LAW SUITS
consumer goods. Globally, when the regulatory “innocent” firm over just six days. → Page 18 CONCERNING ALLEGEDLY
DECEPTIVE FOOD
bar is raised it increases risk for companies, as
AGCS analysis shows that they have to adapt their safety culture to Recalls on the rise in China and across Asia:
LABELING IN THE US
SINCE 2012
maintain higher standards. → Page 14 Products from Asia continue to account for a
defective product-related risk disproportionate number of recalls in the US
is the single largest driver of The rise of new recall triggers: Undeclared and Europe, reflecting the eastwards shift in
allergens are fast-emerging as a primary cause global supply chains and historically weaker
liability claims. Product recall of food recalls. Typically involving such products quality controls in some countries. In 2015
losses are a major contributor. as nuts, milk and wheat, such recalls can often Chinese products accounted for over three times
be the result of manufacturing error (mislabeling) as many recall cases in the US as US products. $183,000
or unintentional cross-contamination. Toxins in Across Asia product safety regulation is improving,
consumer products, in many cases imported and consumer awareness is growing, leading to
from Asia, is another growing concern, while more government-led recalls. → Page 19
PAID A DAY IN PRODUCT
incidents of environmental contamination are RECALL INSURANCE
also rising. Recent cases have come from “Cyber Recall” – technology to drive future CLAIMS OVER FIVE YEARS
(€156,000)
Product–related risk is one of the biggest perils However, many businesses still underestimate the sources such as micro- and nano-plastics, while risks and claims: Developments such as
businesses face today. Defective products not impact a recall event can have, with the costs the discovery of insecticide in Dutch eggs in genome-sequencing provide an opportunity to
$2bn+ only pose a serious safety risk to the public but
can also cause significant financial and
often exceeding expectations, due to inadequate
planning. Typically, the biggest costs are loss of
2017 triggered recalls in 16 countries across
Europe and China. → Page 15
improve the quality and traceability of products
but new technology also brings new risks. Future
reputational damage to the companies sales and business interruption. However, even if product recalls will come from new areas.
concerned. Defective product incidents have a recall event doesn’t result in the billion dollar Economic pressures and the growth of food Automated manufacturing plants increase
OF LIABILITY INSURANCE
caused insured losses in excess of $2bn over the losses that hit the headlines, losses can mount. fraud: Economic pressures continue to bite in efficiency but also increase cyber risk, which is
CLAIMS OVER FIVE YEARS past five years, making them the largest According to AGCS analysis of insurance many sectors, increasing the risk of human error. underestimated, despite recalls for cyber security
RESULTED FROM DEFECTIVE generator of liability losses, according to AGCS. industry product recall claims across 12 sectors, Meanwhile, food fraud, including economic vulnerabilities in cars and cameras. Motivated
PRODUCTS/WORK
Product recall losses are a major contributor. even the average costs of a recall can exceed adulteration and counterfeiting, has become a by extortion or malicious intent, hackers could
€1.4m ($1.65m), rising to over €12m ($14.5m) major issue that has resulted in large recalls, change or contaminate a product by controlling
Although recall frequency can fluctuate year-on- and almost €8m ($9.42m) for significant claims reputational damage and major losses. The machinery. Nanotechnology and 3D printing are
year, and by industry sector, there has been a in the two most impacted sectors – automotive 2013 horsemeat (substituted for beef) scandal two further examples of innovations that could
steady rise in activity over time. A more robust and food and beverage respectively. The loss in Europe is a prime example. There have also change recall exposures. → Page 20
focus on safety and regulation by authorities, totals from individual events can far surpass been issues with organic foods and milk powder.
the rise of complex global supply chains, the these figures. → Page 10 Many food fraud losses are uninsured. The PREVENTING A CRISIS AND THE ROLE OF INSURANCE
knock-on effect from the current economic insurance market is looking at solutions to
landscape, growing consumer awareness, and address this. → Page 16 Pre-event preparation and planning can have a
the increasing influence of social media are EMERGING TRENDS IN PRODUCT RECALL RISK big impact on the size of a recall and the financial
among those factors ensuring recall exposures The rise of non-safety recalls: Non-safety and reputational damage sustained. As part of
are growing significantly. In addition, malicious “Ripple effect” drives larger product recalls: recalls are an emerging phenomenon. a holistic risk management program, specialized
product tampering and even extortion incidents Product recalls are also increasing in size. Companies increasingly feel obliged to recall product recall insurance can help businesses
pose an increasing threat. Meanwhile, advances Global companies now sell their products to products if it emerges that child or slave labor recover faster. As well as covering recall costs,
in product testing could see a rise in litigation millions. At the same time many manufacturers has been used during production in the supply including business interruption, it can also
activity in future, as DNA technology makes it are sourcing components or ingredients from chain or if there are issues around religious or protect against other emerging triggers, such as
easier to establish the link between an incident fewer suppliers. This has seen huge increases in ethical designations, like halal or vegan food, in malicious tampering. It also provides access to
and a company. values of risk and the emergence of a multiplier order to protect their reputations. → Page 17 crisis management services which can help
or “ripple effect” where a single recall can companies prepare by putting both recall and
impact whole industries. The recent recall of crisis management plans in place and
Takata airbags is thought to have affected some organizing simulations which test a company’s
60 to 70 million units worldwide. Managing a procedures, highlighting areas of improvement.
complex global supply chain 24/7/365 poses an While companies periodically conduct a
increasingly difficult challenge. → Page 12 traceability exercise, a full product recall
simulation goes further, incorporating media,
customers and other stakeholders. → Page 22
6 7
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
INTRODUCTION
Drivers of the product recall risk landscape.
Product recall poses an increasing risk increased significantly over the past non-food products that pose a safety Reported incidences are also on the incidents have caused in excess of
for businesses. In the past such recalls decade. We are now seeing and risk, began. And as recent incidents in rise in this sector. Food recalls in the $2bn of losses over five years,
were relatively straightforward and experiencing recalls on a scale not the sector involving the likes of flawed US doubled over a decade, according accounting for almost a quarter (23%)
could often pass unnoticed by the seen before, bringing record levels of airbags, accelerator pedals and to reinsurer Swiss Re 2 while there was of the value of all claims analyzed 4 .
public. Today, they are much more activity and costs. ignition switches (see page 4) a 20%+ surge in US and Canadian This makes it the major cause of
complex, with the stakes far higher – demonstrate – billion dollar loss bills recalls year-on-year in 2016 3, driven liability-related losses for businesses
both in terms of the potential impact to For example, more cars were recalled are no longer a rare occurence. by pathogens and undeclared globally and the third most frequent
a company’s profits and its reputation. than ever before in the US during allergens. At the same time, generator of such claims. The growing
2016 – the third year in a row this RISE IN REPORTED INCIDENCES introduction of new legislation on the number of recalls, and the fact that
Tougher regulation and harsher phenomenon has occurred. According labeling of food allergens across the such claims are becoming larger and
penalties, the rise of large multi- to the National Highway Traffic Safety The food and beverage sector is European Union led to a 60%+ more challenging to settle due to the
national corporations and increasingly Administration, 53.2 million vehicles another that is particularly exposed. increase in recalls in 2016, driven by fact that an issue with a component
complex and consolidated supply had to be returned – over three times As well as having a catastrophic mislabeled allergens (see page 14). or ingredient can cascade through the
chains, the socio-economic landscape, as many as during 2012 (16.5 million). financial impact, a serious event can supply chain, are major contributors to
increasing threat of litigation, This trend is mirrored across Europe. also endanger public health. One of PRODUCT-RELATED RISK LARGEST this development.
technological advances in product The total number of automotive recall the largest recalls in US food history, CAUSE OF LIABILITY LOSS
testing, as well as heightened events jumped 76% year-on-year in involving contaminated peanuts (see
consumer awareness – and growing 2016, according to Stericycle Expert page 12), began after more than 700 Analysis of more than 100,000
use of social media – are just some of Solutions1 - the highest total recorded people in over 40 states fell ill. It insurance industry claims by AGCS
the contributing factors which means since the European Union’s rapid alert ended with the company responsible also shows the increasing risk for
product recall exposures have system (RAPEX), which warns about bankrupt and its CEO in prison. companies. Defective product/work
TOP 10 IMPACTED SECTORS BY PRODUCT RECALLS*: TYPICAL CAUSES OF INSURANCE CLAIMS
* B ased on value of 367
AGCS and insurance
industry product recall
claims. The average claim
1 Automotive/ 2 Food/beverage 3 IT/electronics 4. Retail 5. Manufacturing/ 6. Medical 7. Transportation/ 8. Domestic 9. Chemical 10 Engineering/ is influenced by the
extreme values in the data
industrial supplier e.g. contamination of e.g. defective set-top e.g. loose buttons on packaging/metal e.g. faulty syringes/ logistics appliances e.g. faulty packaging/ construction
set. For example, in the
e.g. faulty electronic cream; contamination boxes; faulty batteries baby clothes; faulty processing/ tape; voluntary recall e.g. faulty plant and e.g. dishwasher recall labeling chemicals; e.g. leaking slurry automotive sector, 57% of
steering systems; air of infant milk; for tablets; overheating table; defective industrial machinery of stimulants due to boiler components; after fire damage; defective plastic pipe; defective claims are below €100,000
conditioning unit undeclared allergens laptop computer flashing toy e.g. defective tow bar; hazard concerns; damaged exploding washing panels construction dryer causing a significant
outages; defective in bagged salad faulty air compressor; defective skin patches transformers machines; tumble decrease in the average
rear view mirrors defective rail injectors dryer recall after fire value. The value of product
recall claims can be
significantly higher and
Average claim value: Average claim value: Average claim value: Average claim value: Average claim value:
Claims values in € lower than the average
€2.12m €1.31m €1.1m €649,000 €722,000 values displayed.
Source: Allianz Global 1 415 automotive recall events in 2016, RAPEX, Stericycle Expert Solutions
Claims analysis does not
Corporate & Specialty 2 565 US Food and Drug Administration (FDA) recall events in 2014 compared with 240 in 2004, Food Safety In A Globalized World, Swiss Re include pharmaceutical
3 7
64 food recall events in 2016 compared with 626 in 2015 based on FDA, US Department of Agriculture’s Food Safety and Inspection industry drug recalls.
Service, Canadian Food Inspection Agency statistics, Food Safety Magazine
4 1
00,073 liability insurance claims analyzed between January 1, 2011 and September 13, 2016, Global Claims Review:
Liability In Focus, Allianz Global Corporate & Specialty
8 9
Engineering/construction 1%
Total number of claims analyzed: 367. Sectors impacted expressed as a
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT
% of claims received. Other sectors account for
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
PRODUCT RECALL
DRIVERS AND TRENDS
AGCS experts examine eight emerging developments in product recall risk.
1. “RIPPLE EFFECT” BEHIND LARGER PRODUCT RECALLS
Product recalls are increasing in size and number, This “ripple effect” has contributed to a number
predominantly driven by the increasing complexity of large product recalls recently, most notably in
of global supply chains and concentration of the food and automotive sectors. For example,
certain components or ingredients on a smaller in 2016, a recall of sunflower seeds due to
number of suppliers, as well as tougher regulation. possible listeria contamination impacted
hundreds of products across dozens of brands.
Global companies now sell their products to Similarly, a 2015 recall of cumin spice
millions of consumers. For example, since (contaminated by nuts) affected 14 companies,
launching the iPhone in 2007, Apple has sold 100 brands, and 153 individual products, and
over a billion units. Meanwhile carmakers VW 756 products in different packages2 .
and Toyota produced over 10 million vehicles
apiece in 20161 . The extent of supply chains in the food sector
was also revealed by the 2008 Peanut
At the same time, many manufacturers are Corporation of America (PCA) recall – one of the
sourcing their components, ingredients or raw largest ever – which was sparked by a
materials from fewer suppliers, as supply chains salmonella outbreak. Although PCA handled
become leaner and more global. This has seen just 2% of the US peanut supply, its peanuts
huge increases in values at risk and the found their way into around 4,000 products,
emergence of a multiplier or “ripple effect”, produced by over 200 different companies. The
where a single recall can impact numerous recall was estimated to have cost the food Photo: Shutterstock
manufacturers, brands and countries, causing industry some $1bn after an industry-wide 24%
reputational damage and large financial losses. reduction in peanut sales. Some leading brands “In the automotive segment we see an hit the US automotive industry and is expected
saw sales almost half3, even though they were increasing number of recalls with higher units,” to result in some 60 to 70 million units recalled
not implicated. The company had to file for says Carsten Krieglstein, Regional Head worldwide, across at least 19 manufacturers 4 .
bankruptcy. Liability Central & Eastern Europe, AGCS. Costs have been estimated at close to €25bn. 5
7 REASONS RECALLS ARE RISING: “This is driven by factors such as automotive
In the automotive sector, large airbag and engineering becoming more complex, faster “A previously innocuous product can result in
– Increasing product safety regulation ignition switch recalls have rippled through the speed-to-market, leaving less time for product billions of financial losses for a sector without
supply chain, affecting millions of units across testing, outsourcing of research and any recourse,” says John Turner, Director of
– Complex and consolidated supply chains multiple brands and countries. development to first and second tier suppliers, Crisis Management at McLarens, a global loss
– Technological advances in testing as well as increasing cost pressures. Modular adjusting company.
– Identification of new pathogens “Today the automotive supply chain is totally strategies of original equipment manufacturers
different to 15 or 20 years ago. Consolidation in (OEM) means the number of recalled units is “Companies are usually confident in their ability
– Economic pressures/cost-cutting the automotive industry has brought efficiencies likely to increase further. to manage their own risks but it’s a different
– Rise in consumer awareness/use of social media but it has also increased product recall risk,” story when it comes to suppliers. You just can’t
–R etailer/original equipment manufacturer explains Christof Bentele, Head of Global Crisis “The technological shift in the automotive manage a complex global supply chain
Management, AGCS. industry towards electric and autonomous 24/7/365. That is a big driver for buying
(OEM) pressure
mobility (see page 21) will create further protection such as product recall insurance.”
recall risks.”
1 Toyota set to remain world’s largest automaker, Forbes, January 10, 2017 The recall involving Japanese airbag manufacturer
2 The Multiplier Effect Strikes Again, Stericycle Expert Solutions
3 Peanut Outlook – Impacts of the 2008-09 Foodborne Illness Outbreak Linked to Salmonella, US Department of Agriculture Takata illustrates just how concentrated recall
4 Takata Airbag Recall - Everything You Need to Know, Consumer Reports, July 14, 2017 risk has become. The recall is the largest ever to
5 Takata puts worst-case airbag recall costs at $24bn, Bloomberg, March 30, 2016
12 13
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
Photo: Shutterstock
2. TOUGHER CONSUMER REGULATION BRINGS MORE RECALLS
In response to a number of high-profile recalls Meanwhile, the number of product recalls in the
and rising consumer expectation around UK hit a record high in 2015/16, increasing 48%
product quality and safety, regulatory scrutiny on the previous year, according to analysis of
has been increasing around the world. Many statistics by law firm Reynolds Porter
countries have implemented stricter product Chamberlain (RPC). The increase was also seen
safety laws (see graphic). in consumer goods, automotive and
pharmaceuticals but was particularly acute in
“There is now much more attention on how the food sector, driven in part by new EU
companies deal with defective or contaminated legislation on the labeling of food allergens. The
products, how responsive they are and how number of recalls of food and drink products
resilient their product safety systems are,” says involving mislabeled allergens increased by 62%
Christof Bentele, Head of Global Crisis in 2015/161 following its introduction.
Management, AGCS. “More than ever, consumers
are also part of the agenda and are driving Product safety regulation has also been
company behavior by making their choices increasing for automotive and consumer goods.
subject to how companies deal with crises.” For example, the 2008 Consumer Product Safety
Improvement Act in the US introduced whistle-
Authorities are now far more proactive, blower protections and new testing
particularly in the food sector. Following a requirements for substances, such as lead, in
number of fatal outbreaks in the US, the Food consumer products. 3. U
NDECLARED ALLERGENS, TOXINS AND ENVIRONMENTAL CONTAMINATION:
Safety Modernization Act (FSMA), signed into THE RISE OF NEW RECALL TRIGGERS
law in 2011, has resulted in the most sweeping “Whether it is the US, Europe or Asia, when the
reform of food safety laws in more than 70 regulatory bar is raised, it creates a risk zone. Typically, a product recall is triggered by safety Meanwhile, toxins in consumer products, in
years. It sees a big shift in regulatory focus – Companies have a mixed ability to maintain concerns that could cause harm or cause bodily many cases imported from Asia, have been
from reaction to prevention – giving the US Food higher standards and adapt their safety culture, injury, although there are many reasons why a another cause of concern in recent years. Lead,
and Drug Administration (FDA) greater powers and this increases risk,” says John Turner, company might recall a product. arsenic and cadmium have been found in toys,
to investigate and order recalls. In the wake of a Director of Crisis Management at McLarens. jewelry and cosmetics, leading to a number of
contamination scandal involving infant milk, During 2016, a number of major food recalls recalls and a tightening of safety regulations. In
China also made significant revisions to its Food were sparked by undeclared allergens and 2007, Fisher-Price 3 recalled 1.5 million toys
Safety Law in 2015. bacterial contamination (in particular listeria, worldwide due to a potential lead poisoning
but also E. coli and salmonella). For example, hazard, while cadmium in children’s jewelry
listeria found in soft cheeses, frozen vegetables, made in China has resulted in a string of recalls
ice cream, apples and cantaloupes have all by retailers in recent years.
RECENT REGULATIONS AND NETWORKS IMPACTING caused large recalls in the US in recent years.
THE PRODUCT RECALL LANDSCAPE INCLUDE: Environmental contamination has also triggered
Across North America and Europe, allergens several large recent recalls, as chemicals and
• E
uropean Union have become a significant public issue – around plastics used in industry and agriculture have
RAPEX; European Consumers Product Safety and Market Surveillance • J apan 15 million Americans are said to have food found their way into food.
Regulation; EU Food Information for Consumers Regulation Food Safety Basic Law; Food allergies1 . In fact, undeclared allergens are fast-
Sanitation Law; Food Labeling
• C
anada
Law; Product Liability Law;
emerging as the primary cause of food recalls in In August 2017, insecticide found in Dutch eggs
Safe Food for the US. In the first quarter of 2015, 95% of recalls triggered a massive recall of egg products in 16
Consumer Product Safety Act
Canadians Act
were due to undeclared allergens, with 91% European countries and as far afield as China.
attributed to undeclared nut/peanuts2 . Early estimates suggested that Dutch chicken
• C
hina farmers suffered losses of almost $40m in that
• U
S Food Safety Law; Auto Undeclared allergen recalls (typically involving month alone as a result 4 . In China, there have
Consumer Product Recall Regulations
nuts, milk, wheat and soy) are often a result of a also been a number of recalls due to heavy
Safety Improvement
Act; Food Safety
simple manufacturing error, such as mislabeling, metals getting into food.
Modernization Act; • T
aiwan mispackaging or unintentional cross-
US TREAD Act Agricultural Production and contamination. But they can also be the result of Micro- and nano-plastics are another potential
Certification Act; Health Food
Control Act; and Food Safety
food fraud (see page 16). source of environmental contamination. Tiny
Protection Fund Act particles of plastic, invisible to the naked eye,
have been found in seafood, table salt, honey,
sugar and beer.
• S
ingapore • S
outh Korea
Consumer Protection (Safety Food Safety Basic Act; Food Sanitation Law;
Requirements) Regulations; Consumer Functional Health Food Act; Consumer
Source: Allianz Global Corporate & Specialty Protection (Consumer Goods Safety Protection Act; Agricultural and Fishery
Requirements) Regulations Products Quality Control Act 1 Centers for Disease Control and Prevention
2 Stericycle Recall Index US Q1, 2015
3 Mattel recalls nearly 100,000 toys after lead paint alert, The Guardian, August 3, 2007
1 UK product recalls reach new high – up 48% in a year, RPC 4 Contaminated eggs cost Dutch chicken farmers 33 million euros, Reuters, August 23, 2017
14 15
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
WHAT’S IN YOUR SHOPPING BASKET?
The food and beverage sector is particularly prone to product recalls
4. IMPACT OF ECONOMIC PRESSURES AND and contamination issues. Based on reported insurance claims, here
THE GROWTH OF FOOD FRAUD are some of the most potentially dangerous items on your shopping list.
Economic pressures continue to bite across
many sectors, putting a growing number of
companies and supply chains under pressure. In
some cases this is leading to increasing risk of
human error and criminal activity. Tougher
trading conditions can lead to companies
sourcing cheaper suppliers or cutting back on SINGLE CREAM SWEETS INFANT MILK GREEN BEANS COOKIES
experienced personnel. It can also tempt Recall risk: Recall risk: Recall risk: Recall risk: Recall risk:
individuals into acts of fraud, such as using bacteria plastic in bacteria insect bacteria
inferior or cheaper ingredients or components. contamination packaging contamination contamination contamination
Food fraud, including economic adulteration
and counterfeiting, is a growing risk. And from
olive oil to wine, to honey to cinnamon, it is big
business. Organized crime groups mix foods
with cheaper ingredients or sell inferior products
as genuine. At the same time some businesses COCONUT DRINK BREAD BAGGED SALAD CANNED PRUNES
can be tempted to commit fraud by the need to Recall risk: Recall risk: Recall risk: Recall risk:
boost profits. Notable incidents include the 2008 lack of glass in undeclared rubber in can
infant milk scandal in China, where milk powder sterilization packaging allergens packaging
was deliberately adulterated with melamine,
and the 2013 horse meat scandal in the UK. The
Based on analysis of 367 standalone product recall claims.
latter involved a massive recall after a Source: Allianz Global Corporate & Specialty
manufacturer mixed imported horse meat with
beef before selling its products as 100% beef.
“Food fraud has become a major issue that has
resulted in large recalls, reputational damage 5. T HE RISE OF NON-SAFETY RECALLS AND LONGER TAIL EVENTS
and major losses,” says Christof Bentele,
Head of Global Crisis Management, AGCS. Non-safety recalls have become something of a Product recall exposures are also becoming
“The horse meat scandal is a perfect example, phenomenon in recent years. These can involve longer-lasting. For example, frozen food has not
but we have seen similar issues with organic the use of child or slave labor during production, historically been associated with product recalls,
foods, religious foods and milk powder. While issues around labeling, food fraud and religious but in 2016 some 456 consumer products sold
some of these food fraud cases can be or ethical designations, like halal or vegan food. under 42 separate brands1 were recalled after
What is economic adulteration?
addressed by insurance, the majority of resulting When consumer expectations are not met in frozen vegetables from US-based producer CRF
The fraudulent, intentional substitution or
addition of a substance in a product for
losses are uninsured. The insurance market is such areas, companies often feel obliged to Frozen Foods were found to contain listeria. The
the purpose of increasing its value or looking for solutions to address this.” recall products in order to protect their nature of frozen food means any contamination
reducing production costs. reputations. only emerges once the food is consumed, which
At the same time, the trend for shorter product may be many months after it was produced,
Since 2012, there have been more than development cycles means less time to test UK and US retailers withdrew food products particularly given best-before dates have been
200 class action law suits in the US products or to fully understand the health after media reports revealed that certain fish creeping up to as long as 24 months for some
against food and beverage companies implications of new materials and ingredients. products could be traced back to boats using products.
regarding allegedly deceptive labelling.1 For example, the use of Bisphenol A (BPA) in slave labor in Asia. In 2015, US and European
food packaging was not an issue 10 years ago. confectionary companies were accused of using In the automotive sector, US regulations now
Today, there are questions over its potential cocoa produced with child labor. require manufacturers to attempt a 100% recall
impact on human health and the environment. rate over a period of at least 15 years. A recent
Recent years have also seen increasing health “There will be incidents when there is no legal or ignition switch recall affected millions of
Photo: Shutterstock concerns about the use of chemical solvents regulatory requirement to recall but it is the right vehicles, some as old as 18 years old. Notifying
known as phthalates, which are used in toys, thing to do. This is a genuine business risk that consumers and repairing older vehicles is more
cosmetics and other products. companies have to be prepared for,” says complex and expensive than for newer vehicles.
Christof Bentele, Head of Global Crisis
Management, AGCS.
1 Swiss Re Institute 1 FDA Investigated Listeria Outbreak Linked To Frozen Vegetables, US Food & Drug Administration
16 17
PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
7. G
ROWTH OF PRODUCT RECALLS AND INSURANCE IN CHINA AND ASIA
Products from Asia continue to account for a safety regulation and consumer expectations
disproportionate number of recalls in the US are rising. Government-led recalls are becoming
and Europe, reflecting the eastwards shift in more common – particularly in China. Recall
6. G
OING VIRAL - THE EXACERBATING EFFECT OF SOCIAL MEDIA FOR IMPACTED global supply chains and historically weaker numbers are also on the rise elsewhere, with
AND “INNOCENT” FIRMS product quality controls in a number of countries Singapore and the Philippines among those
across the region. seeing increased activity.
Social media is a double-edged sword when it “Social media is a real game-changer,” says
comes to recalls. It can be a fast and effective Stewart Eaton, Head of Product Recall, According to the US-China Economic and “More and more Asian companies realize that
way of communicating with customers, help Regional Unit London, AGCS. “An erroneous Security Review Commission, Chinese goods buying product recall insurance makes sense,
early identification of issues and aid restoring post or tweet can cause reputational damage accounted for 23% of all goods in the US in 2014, even when they only operate domestically,” says
brand and reputation following an incident. and directly impact the size of a recall. Social but represented 51% of all product safety AGCS’ Bentele. “It is hard for any company to
media adds a whole new dimension to product recalls. Meanwhile, China’s share of US toy survive in a market with a bad or faulty product.
However, it can also exacerbate product recall recall losses, meaning companies need to react recalls rose from 10% in 1988 to 98% in 20071 . In That is as true for Asia as anywhere else.”
risk if it is not well managed and can be used as much faster.” 2015 China accounted for 2,124 product recall
an outlet for disgruntled customers and groups. cases in the US, compared with 685 from US
Research also shows that social media can even companies. 2 The country also accounted for 62%
Bad news travels fast and a situation can rapidly impact “innocent” brands. A study analyzing of the product safety alerts issued by the
escalate and become out of control. Even a 1,000 automotive social media sites following European Union in 2015. 3
relatively small recall can become a major crisis. recall announcements involving four
Social media channels can quickly spread false manufacturers revealed a sharp increase in “There is a clear link between product recall
or fraudulent information, which can be negative comments about “innocent” brands in claims and the shift in manufacturing to Asia
detrimental to a company’s brand. addition to those directly impacted by the recall and China. Product quality management levels
event; a phenomenon the study called a in Asia are improving but they are not yet up
“perverse halo”1 - a perception that others with the levels seen in the US and Europe,” says
share the problem of the car being recalled. Christof Bentele, Head of Global Crisis
Management, AGCS.
This phenomenon can also impact the bottom
line. Researchers aggregated car models across Asia is still a relatively small market for product
each analyzed brand and found that the recall insurance, compared with North America
negative comments sparked by a rival brand’s and Europe. But while Asian companies once
recall also erased $7.3m, on average, from an only purchased product recall insurance for
“innocent” firm’s market cap over just six days. exports to the US and Europe – especially in the
automotive sector – many are now starting to
“If not well managed, social media can mean a buy cover for their home markets, where product
company has less control of a crisis, but if social
media is approached in a professional and
sensitive way, it can actually help keep a recall
under control,” says AGCS’ Eaton.
Photo: Shutterstock
1 China Product Recalls: What’s at Stake and What’s Next, NERA Economic Consulting
1 Social media amplifies damage of product recalls to firms - and 2 Consumer Product Safety Commission
their rivals, University of Washington Foster School of Business 3 Toys and Clothing Top The List of Dangerous Products Detected in 2015, European Commission
18 Photo: Shutterstock 19PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
GENOME SEQUENCING:
TECHNOLOGY IMPROVES TRACEABILITY
New technology is also making it
easier for regulators and manufacturers
to trace products and identify liable
parties. For example, advances in
genome-sequencing technology are
providing food safety regulators with
a powerful new tool to identify
sources of contamination or food-
borne illness outbreaks, such as
listeria and salmonella.
“This is an exciting advance,” says
Marcos Garcia Norris, Crisis
8. “ CYBER RECALL” - TECHNOLOGY AND INNOVATION TO DRIVE RISKS Management Regional
AND CLAIMS OF THE FUTURE Practice Group Leader, North
America, AGCS.
Advancements in technology are both a boon introduction of innovative but untested Recalls involving emerging technologies are
and a challenge for product recall. On the one advances, such as artificial intelligence, also likely to be even larger and more complex The Food and Drug Administration
hand, they offer an opportunity to improve the nanotechnology or biotechnology. than today. Widespread introduction of (FDA) in the US is using genome
quality and traceability (see column) of autonomous driving in future, for example, is sequencing to match pathogens found
products. On the other, they create new risks. “Cyber is currently an underestimated risk for likely to see a shift in liability from individuals to in sick patients with those found in food
product recall,” says AGCS’ Bentele. “We have product manufacturers, a move that could or production facilities. It also uses
“What we see today in supply chain already seen incidents of recalls for cyber potentially see an increase in recall risk. If a technology to track down the root
management would not have been thought security vulnerabilities in products like cars and series of accidents raises safety concerns for the source of contamination by identifying
What is genome
sequencing? possible even five years ago. The speed of cameras. Concern about automation and artificial intelligence technology behind exactly which ingredient is responsible
The process of development and the potential for machine learning is also likely to be driverless cars, it could trigger a massive recall. for an outbreak and where in the world
determining the
improvements in product safety have been accompanied by an increase in product risk.” the contaminated ingredient may have
complete DNA sequence
of an organism’s quite amazing,” says Christof Bentele, New technology will raise interesting questions originated. Genome-sequencing helped
genome at a single time. Head of Global Crisis Management at AGCS. In 2015, Chrysler recalled 1.4 million vehicles to around liability and insurance. trace a large listeria outbreak to soft
fix a software flaw revealed by security cheese manufactured by a New York-
AGCS works with SGS, a
leading inspection Manufacturing plants are now mostly researchers while webcams2 were recalled “How will insurance policies interact, including based company in March 2017. The
company, to utilize full automated. And while automation should following a cyber-attack in 2016. In August 2017, product liability, recall and cyber? As yet there FDA was able to match the genetic
genome sequencing and
increase efficiency and reduce human error, it the FDA 3 ordered a recall of almost 500,000 are no definite answers,” says AGCS’ Bentele. fingerprint of the listeria bacteria
DNA testing, when
companies want to also introduces the risk of a cyber-attack. pacemakers in the US to patch cyber security found in a number of ill patients with
understand the root Motivated by extortion or malicious intent, vulnerabilities. Already used to manufacture products ranging samples taken at the production
cause of a product
hackers could theoretically change or from aircraft parts to food, pharmaceuticals and facility. It ordered production to be
contamination. This can
help enable businesses contaminate a product at the point of “There are huge pressures to get innovations human tissue, 3D printing is another area that ceased and all products were recalled.
to take recourse against manufacture by controlling machinery or and advances in material sciences, artificial could change recall exposures.
suppliers and gather
changing processes. For example, the US intelligence and biotechnology to market. And POTENTIAL RISE IN LITIGATION
evidence for authorities
and customers in case of Department of Homeland Security (DHS) while fast-evolving technology is good news for “Future product recalls will come from new However, increasing use of such DNA
an incident. recently warned that syringe pumps used in the efficiency of products, it also produces new areas,” says Stewart Eaton, Head of Product technology could result in an increasing
hospitals around the world have flaws hackers recall risks,” says AGCS’ Bentele. Recall, Regional Unit London, AGCS. “As appetite for litigation in future, due to
could exploit to change the dosages being insurers, we have to keep abreast of emerging it becoming easier to establish the link
delivered to patients.1 “Failures can happen when there is a shortage technology issues, such as nanotechnology or between illness and an individual
of time and not enough testing. This is also 3D printing, to ensure we are able to respond company. Conversely, it could also
Technology itself is likely to become a bigger where human error creeps in. And that increases and be proactive.” result in faster claims settlement
driver of product recalls in the future, whether the risk of a recall.” because of swifter identification of
it’s recalls around cyber security or the contaminated products.
1 Security warning over hospital syringe pumps, BBC, September 12, 2017
2 Chinese firm recalls webcams, Daily Mail, October 24, 2016
3 Firmware Update to Address Cybersecurity Vulnerabilities Identified in Implantable Cardiac Pacemakers, US Food & Drug Administration
20 21PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
“The key to how fast and how well a recall works “’Pre-incident’ training needs to be fine-tuned or
PREVENTING
is; prepare, prevent and practice,” adds Marcos a recall could result in a disaster. In the military,
Garcia Norris, Crisis Management Regional for example, if an army unit is going to do a
Practice Group Leader, North America, AGCS. beach landing it knows there is a chance it
“A company that is well prepared will have the could be ambushed, so it prepares accordingly.
information in advance that there is the The same approach needs to apply in a product
potential for a recall, such as chemical analysis recall. If unprepared, anything can happen.”
results and checks etc., and will therefore have
A CRISIS
time to warn authorities and consumers.
2: DISCOVERY
The speed with which a company identifies and Companies should constantly monitor a wide
acts upon a potential issue can have a range of indicators to establish if something might
significant impact on the size of a recall and its have gone wrong as early as possible. For example,
FIVE KEY STEPS TO MANAGING A RECALL impact. Every recall is different, but the first few
hours are particularly crucial when consumer
safety and a company’s reputation are at stake.
monitoring social media can be a good way to
find out what customers are saying. Customer
help lines and other forms of feedback can also
Discovering a problem does not mean just be tracked to see if complaints have spiked.
waiting for a call from the regulator or a
WHEN A PRODUCT’S SAFETY 1: PREPARATION supplier. Frequent product testing is critical to “Perception is everything. Everyone wants to see
COMES INTO QUESTION, TIME IS identifying potential issues early and therefore a company do the right thing. And a poorly
Pre-event preparation and planning can have a big impact on the limiting the size of a recall – infrequent testing managed recall can quickly get out of control.
EVERYTHING – PARTICULARLY IN size of a recall and the extent of financial and reputational damage. will mean more products find their way to So how you handle the initial stages of a recall
THE DIGITAL AGE. DECISIONS market before a problem is apparent. is critical,” says AGCS’ Eaton.
“Around 75% of our work is pre-event crisis consultation, testing
NEED TO BE MADE QUICKLY, BUT protocols and recall plans and running scenarios to put the crisis
ILL-JUDGED ONES CAN ADD COST team through its paces,” says Christof Bentele, Head of Global
AND DAMAGE REPUTATION. Crisis Management at AGCS. FROM A POORLY-MANAGED RECALL TO A SUCCESSFUL RECALL IN FIVE KEY STEPS
RESPONSE CAPABILITY IS VITAL Product recall insurance (see page 26) gives access to crisis POORLY-MANAGED RECALL WELL-MANAGED RECALL
IN FIGHTING THE SIZE OF A management consultants who are experts, having experienced
recalls first hand. For example, AGCS works with red24, a leading risk NO A clear recall plan is in place with
PRODUCT RECALL CLAIM. A and crisis management specialist, with operating experience in over
Unclear roles and
RECALL defined roles and responsibilities.
COMPANY THAT EMBRACES 120 countries. These consultants can use this expertise to help a
RECALL 1 responsibilities due to no recall
plan or insurance in place PLANNING 1 Tracing and mock recalls have
PLAN been carried out
CRISIS MANAGEMENT AND company prepare for a potential situation, putting both recall and
crisis management plans in place. Plans need to be implemented
MAKES IT PART OF ITS DNA IS and tested at least annually. On discovery of potential
Initial discovery of potential
FIRST FIRST
FAR LESS LIKELY TO SUFFER A DISCOVERY 2 defect in products but no one is
DISCOVERY 2
issue company acts
immediately, putting tested
They can also organize product recall simulations to test a sure how to proceed
MAJOR INCIDENCE. company’s recall and crisis management procedures, which help
recall plan into action
familiarize people with the plan and crisis consultants, as well as
Further investigation begins
highlighting areas of improvement. While companies will periodically Company tries to keep issue
in collaboration with crisis
conduct a traceability exercise, a full product recall simulation goes REACTIVE quiet and continues to sell
further, incorporating social and traditional media, customers and RESPONSE 3 product. Results in chaos within
INVESTIGATION 3 management consultants.
Cause of issue discovered.
company and market
other stakeholders. Resolution agreed
Clear announcement made
“How a recall is handled can impact the size of the recall but also SOCIAL Online complaints handled by company. Multi-channel
the potential damage, including the potential for litigation, loss of COMPANY
MEDIA 4 poorly or ignored. Issue 4 communication ensures
70% customers and the impact on brand value and reputation,” says
Stewart Eaton, Head of Product Recall, Regional Unit London, AGCS.
IMPACT escalates and goes “viral” RECALL maximum number of
customers reached
“Many companies are still woefully inadequate when it comes to Incidents continue. Regulator
Customers and media recognize
preparing for a recall, but crisis management services that are REGULATOR orders forced recall. Company POSITIVE
included with specialty recall insurance give you invaluable INVOLVEMENT 5 investigated for continuing to FEEDBACK 5 how well-managed recall
process has been
sell product
guidance when you do not know what to do,” says
70% of recall plans are estimated to be inadequate 1
John Turner, Director of Crisis Management at McLarens.
Cons Significant impact on profits; Brand damaged; Pros No significant impact on profits; No loss of key
Production plants closed down; Loss of client; Legal clients or impact on brand value; Normal service resumes
1 Allianz Global Corporate & Specialty action from regulator and consumer Source: Allianz Global Corporate & Specialty
22 23PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
CRISIS MANAGEMENT SUPPORT:
7 WAYS IT CAN HELP
– Crisis scenario planning and preparation
– Product recall and traceability
– Product testing
– Legal support
– Regulatory liaison
– Crisis communications expertise
– Malicious product tampering
investigations and support
4: COMMUNICATION 5. RECOVERY
The hallmark of a good recall is timely and Recalling a product is a logistical operation, but
honest communication. Early and informed equally as important is to return the business to
notification is key, especially given the potential normal as quickly as possible. A well-managed
for bad news to go viral via social media. recall will proactively work to rehabilitate the
brand and return sales to pre-recall levels.
Relationship management comes to the fore in
a recall. Ongoing regular communication with Follow-up communication with customers,
Photo: Shutterstock customers and stakeholders, like regulators, will directly or through social media, can help
help smooth the process. restore confidence. Offering customers a reward
3: ACTION for their loyalty, such as vouchers or money off
Recall rates in some sectors remain low, future purchases, can also help boost sales. For
Making an informed decision in a recall situation A good well-rehearsed crisis management plan especially food and beverage where products example, following the recall of Samsung’s
is critical, and is an area where planning can will, however, help make the decision-making are quickly consumed or disposed of. But good Galaxy Note 7 smart phone, the company
really pay off. Ultimately, a company will need to process smoother. By working through recall and timely communication should help offered customers a sizable discount on pre-
make the call whether their product is at fault scenarios in advance, the right people should be maximize the recall rate. Today, there are a wide orders of the Galaxy Note 8 model when it
and if it needs to be recalled. This decision is not prepared and in a position to make more range of communication channels available to launched a year later.
always black and white. informed decisions. inform the public of a recall, but not all
companies make full use of them. “Being upfront and transparent is the best
Senior managers will be under immense “Deciding whether or not to trigger a recall is a policy. If a company says that it is sorry and
pressure to take a snap decision, even when all difficult and time-pressured decision, especially “Withholding facts and dishonesty will not make makes a goodwill gesture then customers are
the facts are not known – it may not be clear when the company’s brand and reputation a potential recall go away. It will only make the more likely to remain loyal. And these additional
their product is at fault, or they may not have hang in the balance. But it is more likely that the situation worse,” says John Turner, Director of costs of rehabilitating the brand can be covered
had time to carry out the necessary testing. right decision will be made if the process is Crisis Management at McLarens. “Be upfront by product recall insurance,” concludes Stewart
planned and rehearsed,” says Stewart Eaton, and honest. No one likes the perception that a Eaton, Head of Product Recall, Regional Unit
Head of Product Recall, Regional Unit company is being underhanded.” London, AGCS.
London, AGCS.
24 25PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE PRODUCT RECALL: MANAGING THE IMPACT OF THE NEW RISK LANDSCAPE
Not to be confused with product liability
insurance – which covers the third party liabilities
THE ROLE OF
arising from a faulty product – specialist product
recall insurance is designed to help manage the
considerable costs of a recall and limit
reputational damage. Coverage is tailored to
meet the needs of different industry sectors.
INSURANCE
Demand for product recall insurance has been
increasing over the past decade with greater
awareness of the potential for reputational
damage and significant financial loss.
Take-up has been highest in the food and
beverage sector, reflecting high levels of
FINANCIAL AND
regulation and the size of companies relative to
the exposures. However, automotive, consumer
goods, pharmaceutical and medical device
manufacturers are also typical buyers.
REPUTATIONAL Product recall insurance covers the cost of a
recall and crisis management consultants.
RECALL PROTECTION
“For most businesses crisis management
services can be of huge assistance,” says
Marcos Garcia Norris, Crisis Management
Regional Practice Group Leader, North
America, AGCS. “Few people have the expertise
to know what to do in a recall, especially given
changing regulations.”
Crucially it can also cover business interruption
losses and associated additional costs of
working. If, for example, a listeria outbreak
forces a food company to close a plant and
cease production, insurance can cover the cost
of using an alternative plant or competitor to
produce the goods.
Product recall insurance typically responds when
a product causes actual bodily injury or property
damage, or poses an imminent risk of doing so.
But it can also be extended in some circumstances
to include other triggers, such as malicious
tampering in the food and beverage sector.
In the automotive sector, the main trigger is
typically bodily injury and property damage, but
policies can also include product impairment
cover, where a product is recalled because it
fails to perform the function for which it was
manufactured.
Photo: Shutterstock
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