Allianz Global Corporate & Specialty (AGCS), Allianz’ specialist corporate insurer, launched Automotive Component Parts Product Recall cover for the UK market, which enables customers to mitigate the risk of expenses linked to a recall.
These expenses can range from the product manufacturer’s recall costs, repair and replacement expenses as well as legal defense costs, said AGCS. AGCS also offers its customers crisis-management assistance services provided by partner company, WorldAware.
Initially, the new standalone product recall solution for automotive component parts manufacturers will be available in the UK, with markets in North America and Asia to follow, said AGCS.
The coverage is designed to address the evolution of the automotive industry, which has moved from the manufacturing of individual mechanical parts to the integration of electrical systems, software and new technologically advanced components that interact with one another, explained AGCS.
With the introduction of more complex and integrated component parts and last-minute production, the possibility of defects and ultimately recalls increases, the company continued.
AGCS’ new automotive recall product provides a simple, clear and direct solution which includes impaired property as well as endorsements covering cyber-attacks and line stoppages, activated by a single, comprehensive insured event – a product recall.
“The automotive industry is undergoing extraordinary change and a rapid transition to new technology,” said Christof Bentele, head of Global Crisis Management at AGCS.
“Alongside this, closer government regulatory scrutiny as well as increasingly complex global supply chains and growing consumer awareness will only contribute to bigger and more damaging automotive recalls in the future,” added Bentele. “In this rapidly changing environment it is critical that automotive component manufacturer’s recall insurance policies are ‘fit for purpose’ and tailored to cater for the future risk landscape.”
“Current recall insurance products for automotive component manufacturers are often unclear and fail to address the new and emerging issues faced by today’s modern automotive industry,” said Stewart Eaton, head of Product Recall at AGCS UK.
He said AGCS has developed an automotive recall product that offers “a clear and simple solution to the emerging risks faced by an industry undergoing radical change.”
Automotive Recall Risks Rise in Severity
Automotive recalls have become some of the most expensive and large-scale of product recalls due to the use of many common components, said AGCS, noting that a single recall can affect a whole industry, bringing significant reputational and financial damage.
AGCS cited the example of defective airbags – one of the largest recalls to hit the automotive industry to date, which is expected to result in some 60 to 70 million units recalled worldwide across at least 19 manufacturers, with an estimated cost of close to US$25 billion.
The average value of large recall claims in the automotive industry is €12.4 million ($13.6 million), said AGCS quoting a recent Allianz report titled “Product Recall: Managing The Impact of the New Risk Landscape.”
Analyzing 367 insurance industry product recall claims from 28 countries across 12 industry sectors, the report found that automotive recalls account for over 70 percent of the value of all recall losses analyzed.
This is driven by factors such as complex engineering, reduced product testing times, outsourcing of R&D and increasing cost pressures, said the report.
In the future, the potential for recall risks will increase with the technological shift in the automotive industry towards electric and autonomous vehicles, it continued.
Source: Allianz Global Corporate & Specialty
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