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Survey Report

Insurance Marketplace Realities 2022 – Product recall

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November 15, 2021

Keep an eye on regulatory risk. Expect oversight activities and enforcement action to accelerate.

Rate predictions

Rate predictions: Product recall
  Trend Range
Product recall Neutral Increase (Purple triangle pointing up) Flat to +5%

Key takeaway

Keep an eye on regulatory risk. Expect oversight activities and enforcement action to accelerate.

Rising regulatory risk points to greater product recall exposure.

  • Whether inspections take the form of remote evaluations or on-site audits, inspectors will be looking broader and deeper – both in terms of reviewing documentation and environmental sampling – for evidence that companies are not only compliant now but have been so over the previous 12 months or more.
  • The changes in governmental activity that began in 2021 are expected to continue into 2020.

There have been significant developments in the recall marketplace.

  • The underwriting market is seeing value in the MGA model as opposed to the traditional insurer model.
  • The specialty focus of the MGA model in a line such as product recall lends itself to long-term relationships that can bring value to insureds.
  • One MGA has entered the space and is looking to become the leading recall insurer in the field. They are made up of underwriters and leaders from a major reinsurer that brought in new leadership for the product line.
  • Another product recall team has moved from a traditional carrier to a new shop.
  • Overall, the market movement has been favorable for buyers: the top end of rate increases is expected to drop from 7% to 5%.

Consumable products

  • Due to COVID-19 there is continued focus on the safety of the food supply chain.
  • The FDA has increased its focus on baby food and supplements with the Baby Food Safety Act 2021.
  • Q1 2021 consumable product recalls impacted 2.4 million units — a 31% increase over Q4 2020.

Automotive

  • Recalls in Q1 2021 impacted 13.2 million vehicles — an 82% increase over Q4 2020.
  • OEMs are facing a new era of cybersecurity and data privacy risk.
  • There has been Senate pressure on the National Highway Traffic Safety Administration (NHTSA) to be more transparent and effective in its dealings with OEMs regarding issues that may result in recall events.

Life science

  • Drug fraud due to shortages of raw materials will continue to be a major concern.
  • Global regulators are collaborating — not a routine practice.
  • The PREP Act (Public Readiness and Emergency Preparedness Act), passed in 2005 as a tort shield for vaccine manufacturers, is at the center of COVID-19 lawsuits involving distribution of vaccines at nursing homes and assisted living facilities.
  • When consumers think of pharmaceutical recalls, highly publicized events come to mind – from the historical Tylenol and Vioxx withdrawals to more recent recalls of metformin, ranitidine and valsartan. While these events are old news, the possibility of brand-specific recalls leading to brand agnostic recalls is one the entire industry needs to watch carefully.
  • Class II recalls accounted for only 37 recalls in Q1 2021 but they involved 8 million units — eight time the units resulting from Class I recalls.

Consumer goods

  • The Consumer Products Safety Commission (CPSC) is continuing its hands-off approach, relying on manufacturers to do the right thing. At the same time, this approach is countered with alarming public safety notices, greater individualized investigations and fines.
  • CPSC is looking to go beyond enforcement and become more of an e-commerce/information platform.

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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