Product Recall Risks Grow as Technology Drives New Triggers
Dec. 5, 2017—Product-related risk is one of the biggest perils facing businesses today, with recall exposures increasing significantly over the past decade, bringing the potential for larger and more complex losses than ever before, warns insurer Allianz Global Corporate & Specialty (AGCS) in a new report.
Product Recall: Managing The Impact of the New Risk Landscape analyzes 367 insurance industry product recall claims from 28 countries across 12 industry sectors between 2012 and the first half of 2017.
Automotive recalls most expensive and large-scale due to “ripple effect”
Automotive recalls account for over 70 percent of the value of all losses analyzed, which is unsurprising given recent record levels of activity in both the US and Europe.
“We see an increasing number of recalls with higher units in the automotive industry,” says Carsten Krieglstein, Regional Head of Liability, Central & Eastern Europe, AGCS. “This is driven by factors such as more complex engineering, reduced product testing times, outsourcing of R&D and increasing cost pressures. The technological shift in the automotive industry towards electric and autonomous mobility will create further recall risks.”
One of the largest recalls to hit the auto industry to date, involving defective airbags, is expected to result in some 60 to 70 million units across at least 19 manufacturers being recalled worldwide.
Costs have been estimated at close to $25 billion.