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Why Some Manufacturers Don’t Purchase Products Recall Insurance

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Why don’t most manufacturers purchase Products Recall Insurance?

That’s a good question and when I ask new clients or prospects who don’t purchase product recall insurance I get a variety of answers.  Here are just a few:

  • I didn’t know I needed it. In many cases, the decision-maker believed incorrectly that the company’s product liability insurance covered recalls.
  • I thought it would be too expensive. Typically, Product Recall Insurance is a small percentage of a firm’s total insurance spend and quite affordable. Especially considering the uninsured downside risk.
  • I never had a recall in the past, so I didn’t think I needed it. This answer is shocking.  Most manufacturers have never sustained a fire in their plant, but they do carry fire insurance. Yes, fire insurance is mandated by your creditors, but it’s impossible to fully predict the future based on prior experience. This is especially true when you give up control of the product and don’t know how it’s handled after you relinquish control.
  • We produce a quality product and have a great QC process; we don’t need recall coverage. This is true of almost every company that has ever experienced a recall.  If you recall, a few years ago the ice cream company Blue Bell had a recall of listeria contamination. Blue Bell is a premium brand regional ice cream company located in Texas that has a devoted following. I’m sure they believe they have a high-quality product and excellent quality control process. Unfortunately, their product sickened at least 10 people with listeria which lead to 3 deaths in Kansas.

The bottom line is that the cost of a recall for a food product (or a durable product for that matter) can be massively expensive and damaging to a firm’s revenue, profitability, and reputation.

Self-funding a recall out of pocket isn’t feasible, especially for privately held smaller manufacturers.  The massive amount of capital required to effectively mount a recall and handle the public relations crisis while the company is not producing products thereby cutting its revenue flow is incalculable. It’s not uncommon for a recall to trigger corporate bankruptcy. Don’t let this happen to you and your company.  The purchase of product recall insurance helps move this risk off-balance sheet and assure your firm’s sustainability.

As experts in Product Recall Insurance, let’s have a conversation about the costs, the coverage, and how we can help you. Click the button below to get started and know more about risk management insurance in New York.

This is an ongoing article explaining what product recall insurance for food manufacturers is all about, and the key issues you need to consider when purchasing coverage.

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