Because of the following reasons, there is a tendency for general insurers not to actively sell recall insurance.
- If a recall occurs even once, there is a high likelihood that the amount of insurance benefits paid will be high.
- The frequency of recalls has been high in recent years.
- The degree of efforts by companies to raise quality is reflected in the occurrence rate.
If, however, a business company is prepared for recalls, it is possible to procure a certain level of recall insurance. Also, the potential risks differ for each product, and as a result of the insurance terms differ for each product, but foods and beverages belong to a category for which it is relatively easy to obtain underrating, while automotive components are in a category for which it is relatively difficult, although it varies depending on the component.
The specific factors that are emphasized when making recall insurance underwriting decisions are as follows.
- Indemnification provisions in supplier (product purchase) agreements
- In the case where a potential risk relating to a handled product is identified, the process relating to investigating the cause and determining the risks
- In the case where a recall is implemented, crisis management planning such as specific internal flows and communication plans.
- Receiving inspections for product safety
- Traceability of sold products
- Timely identification of sold products
- Method of disposal of recalled products (who, where, how)
- Systems for checking compliance with laws and regulations relating to handled products
In the current Japanese insurance market, even when insurers determine that they can underwrite recall insurance, in many instances, capacity (the maximum amount that can be paid by a single insurance company) is limited (e.g. ¥1 billion), and there are cases where companies that need recall insurance are not able to procure adequate capacity. In these cases, Marsh can directly access international insurance markets in London, Germany, Singapore and other locations to procure capacity globally and arrange recall insurance.
