Allianz Global Corporate & Specialty has started offering coverage for auto parts manufacturers, enabling them to reduce expense risks related to a recall.
Allianz’s specialist corporate insurer said its Automotive Component Parts Product Recall will help mitigate expenses ranging from the product manufacturer’s recall costs, repair and replacement expenses, as well as legal defense costs. AGCS also offers its customers crisis-management assistance services provided by partner company WorldAware.
Initially, the new standalone product recall cover 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’s new automotive recall product is billed as offering a simple, clear and direct coverage option including impaired property as well as endorsements covering cyber attacks and line stoppages, activated by a single, comprehensive insured event—a product recall.
Automotive recalls have become some of the most expensive and large-scale of product recalls due to the use of many common components, AGCS said, 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 60-70 million units recalled worldwide across at least 19 manufacturers, with an estimated cost of close to $25 billion.
The average value of large recall claims in the automotive industry is $13.6 million, AGCS said, citying the recent Allianz report “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.
Source: Allianz Global Corporate & Specialty