Product Recall Insurance

Product Recall – Overview

The recall of a product can quickly spell crisis for a business, with an urgent need to recall products no matter where they are, placing a significant burden both logistically and financially.

Recalls of any kind can impact cash flow, squeezing a company’s ability to pay staff, purchase raw materials or even continue production. Recalls happen all the time, and are growing in frequency. Therefore businesses should regularly review their risk management approach to a recall, and at least consider transferring the risk to insurers.

The key risks

The immediate costs of recalling products and engaging in a large scale logistical operation can be significant, in addition to replacement and reproduction.

When an error or fault is discovered during production, investigations must take place to determine the reasoning; whether it be errors in process, faulty materials, faulty machinery, accidental human errors or malicious tampering. During an investigation, no production or sales can take place.

Businesses should also be mindful of any adverse PR, which can cause major damage to brand reputation and could be magnified by social media. These costs may not be immediately quantifiable but also represent a significant risk.

Transferring the risk with insurance

No critical control point in manufacturing or testing is fool proof, and therefore no business can be 100% certain they have prevented human error or malicious tamper. A manufacturer’s exposure to their supply chain is vast; the end product is only as good as its worst supplied component.

A Product Recall policy can provide a business with the financial reassurance and support they need by covering the costs of a recall, investigations, as well as replacing the loss of sales to keep the business afloat. Certain policies also cover the costs of appointing a PR firm to negate any negative publicity.

Given the often large figures involved in claims, Product Recall insurance tends to be viewed as a form of balance sheet protection. Premiums reflect the risks associated and therefore aren’t minimal; however, a quotation can allow a business to decide whether it’s more cost-effective to manage the risk internally or have the reassurance of an insurance policy ready to cover the costs.

At Hayes Parsons Insurance Brokers, we have a panel of leading Product Recall insurers, and would welcome a conversation should this be of interest.

About the author

Ryan Legge is a Chartered Insurance Broker and has vast experience working with a range of industries. If you have any additional queries about clinical trial insurance, please get in touch with Ryan via phone or email:

Ryan Legge FCII | Chartered insurance broker
[email protected]
07889 561 418