Clyde & Co legal director Jason McNerlin has called on insurers to get their manufacturer clients to not only plan for product recalls – the number of which has been rising significantly – but also rehearse those plans to be fully prepared.
According to the global law firm, food alerts in the European Union have posted a steady increase from as little as 10 in 1995 to 2013’s and 2017’s serious alerts of 519 and 818, respectively. Last year’s figure was a record high. As for recalls relating to EU motor vehicles, the number rocketed 150% from 149 notifications in 2012 to 372 in 2016.
“Manufacturers and their insurers need to be aware of this rising trend for product recall events, and the impact of heightened government involvement around the world,” McNerlin told an audience of 50 insurance professionals in London. “In fact, government oversight of product recall may well be at its highest ever level.
“In the UK, we’ve seen the formation, within the last few weeks, of the Office for Product Safety and Standards. Its priorities include establishing an incident management capability to respond to national product safety issues.”
McNerlin said more resources are being allocated to make processes more effective, and that the degree of oversight is increasing not only in the UK but internationally and across different product sectors. In the US, for instance, there have been concerns about manufacturers not giving timely notice to the authorities – what with high-profile vehicle recalls in recent years.
“Generally, the trend is towards expecting earlier precautionary reporting and corrective action,” he explained. “There are demands on authorities and manufacturers alike to prove that actions have been prompt and successful. In some instances, recall completion rates remain stubbornly low.
“Even in the automotive sector, which tends to see higher success rates than other sectors, research suggests some large-scale recalls in the US have a completion rate of only around 50% of affected vehicles. We should expect to see continuing pressure on manufacturers and others to do more to achieve higher success rates.”