Commercial Insurance
What you need to know: Product Recalls on the Rise
Most insurance questions do not begin with policy language. They begin with a practical moment: something changed, a risk became easier to see, or a coverage question started to feel more expensive than it used to. This article is for the point where you are trying to understand business insurance before renewal, a contract requirement, a certificate request, or a claim changes the conversation. The useful move is not to memorize every policy term. It is to name the situation clearly enough that you can ask better questions, compare the right details, and avoid making a decision from pressure or guesswork.
Short answer
What you need to know is best understood as a decision guide: use it to identify the main coverage issue, the likely blind spot, and the next question to ask before you rely on a policy, quote, or renewal assumption.
Reader checkpoint
Before you act on this topic, ask these three questions.
- What changed in the business, contract, property, equipment, payroll, or operations since the last policy review?
- Which loss would be hardest for the business to absorb without a coverage response?
- Is this issue handled by the current policy, an endorsement, a separate policy, or a better documentation process?
Quick answer
What this article is mainly about
The number of product recalls reached a 20-year high in the third quarter of 2022, according to the U.S. product … The practical takeaway is to use the article as a starting point for a clearer coverage conversation, not as a guarantee that every policy or claim will be handled the same way.
At a glance
What to identify before the next decision
Main issue
business insurance decision clarity
Common blind spot
Business changes that outgrow last year's policy assumptions
Useful document
Current policy, certificates, contracts, payroll or sales estimates, and claim records
Best next step
Commercial Renewal Readiness Score
How to think through business insurance
The number of product recalls reached a 20-year high in the third quarter of 2022, according to the U. S. product recall index released by Sedgwick Claims Services Management Inc. Across the five industries tracked in the index, 1. 22 billion product units have been involved in recalls, up from the previous record set in 2018 of 1. 20 billion. There are several reasons why regulators issued more recalls in 2022. For instance, the Food Safety Modernization Act of 2011 gave regulators more oversight of different food and products, and new technology, including artificial intelligence tools, allowed regulators to identify potential harms sooner.
In addition, ongoing effects from the COVID-19 pandemic, such as increased employee turnover and staff shortages, increased the chance for human error. Third Quarter Highlights The driving factor behind the record-breaking number was the increases in the average recall size for the pharmaceutical and medical device industries, both of which saw their average recall size increase by more than 500%. While medical device recalls decreased in the third quarter of 2022, the number of units impacted increased by 411%. Similarly, pharmaceutical recalls fell 13. 8% in the third quarter, but the industry saw 107. 2 million units impacted. Other highlights from the third quarter recall data include: Automotive recalls increased by 2.
9%, but the number of impacted vehicles fell from 9. 21 million in the second quarter to 5. 23 million in the third quarter. The number of consumer product unit recalls decreased by 19. 2%. U. S. Food and Drug Administration food and beverage recalls fell 18. 3%, but the average number of units recalled rose by nearly 159%. Mitigating Product Recalls As manufacturers continue to face challenges relating to regulatory activity, ongoing geopolitical issues, supply chain disruptions and an uncertain economic future, it’s important for organizations to take the following steps to reduce the threat of a product recall: Commit to quality. Commitment to turning out the highest quality products is the best countermeasure to the threat of a product recall crisis.
Important details to compare
Prepare a contingency plan. Research indicates that the first 48 hours of a major product incident are more crucial than the next 48 days. Every company should have a workable product recall and crisis management plan. Focus on training. Contingency plans aren’t of much use if they haven’t been tested and honed under simulated conditions to ensure the plan is effective. Respond with expertise and decisiveness. Even with a good team and plan, there is a place in a recall crisis for professional consultants. Transfer risk where possible. The last line of defense is a solid product recall insurance program—one that indemnifies the host of extra expenses and losses in revenue that come with product withdrawals.
As the number of products recalled continues to increase, organizations must be proactive in reducing their risk. Contact us today for more risk management guidance or to discuss a product recall insurance option.
Defined Q&A
What you need to know: common questions
What should I check first for business insurance?
Start with the declarations page and the specific change or risk that made you look up the topic. Coverage conversations get clearer when the question is tied to a real property, vehicle, operation, contract, claim, or renewal decision.
Does this article mean I need a different policy?
Not necessarily. It means the issue is worth checking before you assume the current policy handles it the way you expect. Sometimes the answer is an endorsement, documentation, a different limit, a separate policy, or no change at all.
When should I ask an agent to review this?
Ask before a deadline, renewal, contract requirement, major purchase, property change, business change, or claim decision. A short review is usually easier than trying to fix a coverage assumption after the fact.
The value of this article is not that it turns you into an insurance technician. The value is that it gives you a cleaner way to look at business insurance before the decision becomes rushed. A better question asked early can prevent a frustrating answer later.
If one part of this topic felt familiar, start there. Pull your policy, contracts, certificates, payroll or sales estimates, and recent operational changes, then compare that real-world detail against the coverage question raised above. One clearly understood item is worth more than a full policy read done under pressure.