Product Recall Insurance

Product recalls or contamination costs can easily run into the millions of pounds. In addition to the physical expenses of withdrawing the product from the market, the knock-on effects are likely to be costly.

Product recall policies cover the potential fallout of such an event by providing comprehensive cover for you and your business, whether the event is triggered by a manufacturing error, a product safety issue, or other scenarios such as animal by-product or allergen mislabelling.

What is product recall insurance?

Despite the frequency and high costs of a recall, most companies don’t adequately plan, prepare, practice for, or buy insurance against product recall events, protecting cash-flow. In addition to proper insurance covers, careful planning is essential in managing the risk of a recall.

Product recall insurance policies often include pre-incident consultancy to minimise the risk of a product recall event occurring, and post-loss crisis containment to mitigate the aftermath and reputational harm if it does.

Features of product recall insurance

Premises and product rectification costs, including redesign and remanufacture
Loss of future sales, typically 12 months
A wide range of costs associated with a recall including investigation, storage, transport, disposal and destruction of damaged goods
Comprehensive brand and reputation protection
Range of pre-incident consultancy solutions
24/7 crisis management hotline for you in the event of an incident

Types of product recall cover

Recall expense - this out-of-pocket expense is associated with executing a large-scale product withdrawal. It includes costs like extra temporary employees, overtime, public safety messages, special testing and handling, destruction and disposal costs and crisis management and/or PR consulting fees.
Replacement costs - as the name implies, this is the cost of replacing any product that had to be destroyed. This includes the cost of materials, labour and overheads directly associated with producing the product.
Loss of profits - this indemnifies the insured for profits which would have been earned on the withdrawn products and also for profits which would have been earned on future product sales, but which were not earned because of resultant future sales declines. This is usually limited to a specified time period.
Brand rehabilitation - most policies will also indemnify the insured for necessary rehabilitation of the recalled product’s consumer image. This includes costs like extra advertising, increased expenditures to rush a new product to market and special promotions to rebuild public trust in the manufacturer and its products.

Other covers available with our product recall insurance

Contaminated product insurance

Malicious tampering and/or intentional contamination are rare, but when they happen can cause a very severe loss. Managing this risk can be difficult, as motives vary widely.

Accidental contamination cover

This is an unintentional error in the manufacturing, packaging or storage of a product. It includes mislabelling of ingredients, contamination by a foreign object or chemical, etc.

This is a common risk, and while the majority of incidents are discovered prior to shipment, huge losses have occurred due to accidental contaminations which were not detected in time.

Product extortion insurance

Not as common as accidental contamination, though more frequent then malicious tampering, product extortion can evolve into outright tampering cases, which are very costly.

Product recall cover FAQs

Is product recall covered under my product liability policy?

No, product liability cover generally excludes contamination and recall events. The protection of a product contamination or product recall policy protects a company’s bottom line by covering the direct costs of recall.

What is the difference between first-party and third-party exposure?

There are two categories of exposure to loss for a company faced with a product recall incident: first-party operational losses to the company and third-party liability losses to injured persons.

Unlike third-party losses, first-party loss is often overlooked. In addition to the initial recall expenses, the potential long-term losses from the damage to a company’s reputation and loss of sales may continue for months or even years.