In the current environment, even the most conscientious organizations can be caught by a need to recall their products. A simple mistake, the slightest error or perhaps incorrect information from a third party and a company’s reputation and finances could be in ruins. Product integrity and brand name protection by an efficient rectification of the defective products should be recognized by any manufacturer or supplier as a priority.
Product recall caused by product tampering and contamination incidents can be covered under Product Recall Insurance. Product Recall Insurance policies help to cover the additional costs of a recall including: product loss, costs to withdraw the product from the market, product disposal, overtime wages, product testing, and costs associated with crisis management.
There are several Product Recall coverage forms that can ensure your policy provides protection for:
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 cost. 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 overhead directly associated with producing the product.
Lost profits. Product Recall Insurance indemnifies the insured for profits that would have been earned on the withdrawn products and for profits that would have been earned on future product sales, but which were not earned because of resultant future sales declines.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 period.
Brand rehabilitation expense. Most Product Recall Insurance policies will also indemnify the insured for the necessary rehabilitation of the recalled product’s consumer image. This includes costs like extra advertising, extra expense to rush a new product to market and special promotions to rebuild public trust in the manufacturer and its products.
Learn more about the specialized coverage we can offer and policy types for: