Cunningham Lindsey says number of goods being called back as risen 300%
Loss adjuster Cunningham Lindsey has reported a year-on-year quadrupling in the number of product recall claims following a dramatic increase in goods being called back.
Head of Cunningham Lindsey’s product liability and recall team Andrew Robinson said the 300% rise was partly due to a greater market for this risk, as businesses become more alert to the potential of major losses following recalls.
He said: “There has been a huge increase. Previously, the insurance market for recall was very narrow, but over the past 12 to 18 months more insurers have become involved in writing recall insurance.”
Over the last year, Allianz Corporate & Specialty has reported a 50% annual rise in the number of enquiries about product recall insurance from worried businesses.
The increased concerns have been prompted by a jump in the volume of product recalls over the past five years.
According to the European Commission, the number of notified products recorded by the EU recall registration system Rapex has quadrupled from 468 in 2004 to 1,993 in 2009, while last year saw a 7% increase in the number of recalls compared to 2008.
The surge in claims is due to increased regulation following on from new EU directives in 2005 and a greater reliance on imported products from countries such as China, Taiwan, Vietnam and India where quality standards can be lower.
Rapex figures show that 60% of the products notified in 2009 originated in China. Meanwhile, outbreaks in E. coli, salmonella and listeria in meat products over the past decade have also led to a greater number of food recalls.
But, despite the surge in product recalls, Robinson estimated that as few as 5% of UK businesses have adequate cover.
Chartis crisis management liabilities division manager Scott Keane said the onus was on insurers to encourage greater take-up of product recall cover to help meet this growing risk.
“With businesses facing tough economic conditions, with pressure on costs and margins, it is very easy for them to think that this sort of additional insurance spend is a luxury they can’t afford. But that could be a false economy that may cost them dearly,” he said.