Allianz Global Corporate & Specialty SE (AGCS), Allianz Group’s specialist carrier for corporate insurance business, today launched a new UK Automotive Component Parts Product Recall cover enabling 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 defence costs. 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.
The new 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. With the introduction of ever more complex and integrated component parts and last-minute production, the possibility of defects and ultimately recalls increases. 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.
Automotive recalls one of the most expensive and large-scale due to “ripple effect”
Recalls within the automotive industry have increased in volume and severity within recent years causing reputational and financial damage. According to the recent Allianz report “Product Recall: Managing The Impact of the New Risk Landscape”
, analysing 367 insurance industry product recall claims from 28 countries across 12 industry sectors, automotive recalls account for over 70% of the value of all losses analysed. This is driven by factors such as more complex engineering, reduced product testing times, outsourcing of R&D and increasing cost pressures. The technological shift in the automotive industry towards electric and autonomous mobility, create further potential recall risks. Product recalls can be expensive. The report revealed that the average value of large recall claims in the automotive industry is EUR12.4m.
One of the largest recalls to hit the automotive industry to date, involving defective airbags, is expected to result in some 60 to 70 million units across at least 19 manufacturers being recalled worldwide. Costs have been estimated at close to US$25 billion. This incident exemplifies the growing “ripple effect” which impacts the automotive sector. Given the use of many common components, a single recall can impact a whole industry.
“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. 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. “Allianz has been active in automotive recall insurance for over four decades and we have accumulated invaluable experience and data to navigate the many changes to the industry over that time. We’ve now developed a new automotive recall product to offer a clear and simple solution to the emerging risks faced by an industry undergoing radical change. I’m looking forward to sharing it with our clients and partner brokers.”
For more information about AGCS’ wide-ranging crisis management services and solutions that can help you to respond to a number of situations, from product recalls and contamination, to terrorism and political violence coverage click here