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Survey Report

Insurance Marketplace Realities 2021 – Product recall

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November 18, 2020

Pressure on manufacturers to focus on safety has never been greater as retailers ban unsafe products and rely less on regulators.

Rate predictions

Rate predictions: Product recall
  Trend Range
Product recall Neutral increase Flat to +7%

Key takeaway

Pressure on manufacturers to focus on safety has never been greater, with retailers taking the onus onto themselves to ban unsafe products from their shelves and relying less on regulators.

We have seen little impact from the COVID-19 pandemic on the product recall marketplace, as we see no evidence that the virus is a food-borne or product-borne pathogen.

  • Studies by the Chinese government pointing to COVID-19 surviving on certain products have not been supported by U.S. officials.
  • While the impact on the recall market has been minimal, the effect on client operations has been substantial — temperature checks, new plexiglass partitions and utilization of crisis consultants have altered the normal ways of doing business.
  • There has been a squeezing of supply chains, which could create uncertainty as new suppliers are brought into the mix.

What to expect for 2021

Consumable products:

  • More preventative controls are coming from the FDA focused on contract tracing of produce.
  • Allergen handling will be further regulated.
  • Technology will play an increased role in food safety with the FDA’s “New Era of Smarter Food Safety Blueprint” being released in early 2021.

Automotive:

  • NHTSA will continue to take aggressive positions concerning recalls with OEMs.
  • OEMs are working more closely with app-based ride share companies — one in six Uber/Lyft cars in Seattle have open recalls, according to a study by Consumer Reports.
  • Core components (e.g., airbags and seatbelts) are returning to the forefront of regulatory concern.

Life science:

  • Drug fraud due to shortages of raw materials will continue to be a major concern.
  • Health issues surrounding the chemical NDMA could lead to more testing of other ingredients that may have carcinogenic impurities.
  • The recall process for medical devices is expected to become quicker and stricter — the FDA is looking to hold manufacturers and hospital groups more accountable.
  • New regulations around cybersecurity are in the works.

Consumer goods:

  • The SHARE Information Act, if passed, would increase financial penalties against companies for violating safe product laws and for failure to share safety reports.
  • More investigative journalism around the responses to recalls could lead to stricter and more public regulations. There have been several recent stories on the inaction of companies during a safety incident.
  • Retailers will make their banning of product categories more public — Walmart and Amazon, for example, no longer sell incline baby sleepers, which were never formally recalled, but seen as a major safety concern.

The recall insurance marketplace remains flexible in its underwriting approach during this chaotic time.

  • While early 2020 (i.e., pre-COVID-19) was shaping up to be a hardening market, in the early days of the COVID-19 crisis many carriers communicated a willingness to give favorable consideration to clean risks, as well as simplifying the data collection process.
  • Food accounts continue to be fought over by the market.
  • Having ample time to market renewal submissions is more crucial in this climate.
  • While one major reinsurer has become very cautious about participating in the casualty market, they have doubled down on their commitment to the recall market.
  • There have been no major changes to capacity — in fact two new markets have recently entered the space.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

Contacts

Kevin Velan
Director, National Product Recall Team

Shawn McCleary
Broker, National Product Recall Team

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