Product Recalls and Increased regulatory scrutiny
Manufacturer quality control
The past few years have seen a rise in product recalls and increased regulatory scrutiny of manufacturers. Several high-profile scandals involving food, toys, cosmetics, and other products have made consumers more wary about the products they buy.
At the same time, there have also been efforts to improve accountability through supply chain transparency initiatives such as the Collaborative Council on Food Safety VENDORS program, which is an example of third-party verification in the food supply chain and an effort to make supply chains more transparent so that manufacturers are held accountable for their suppliers’ actions. Companies that take steps to manage these issues can help mitigate potential risks while also avoiding reputational damage and other repercussions. Read on to learn more about product recalls and how you can respond if your company is affected.
What is a product recall?
A product recall involves a manufacturer or seller voluntarily withdrawing a product from the marketplace after identifying a hazard with the product that poses a risk to consumers. A product recall isn’t the same as a quality control failure, where the product is still safe to use but doesn’t meet standards. Instead, it’s a serious action taken when a product is deemed to be potentially harmful or defective, posing a threat to consumers. A product recall is initiated by the manufacturer or seller of the product, not by a government agency or regulatory authority. Every industry has different products and different types of hazards. From food to cosmetics to toys, every industry has different products and different types of hazards — and every industry requires different safety regulations.
Consumer product safety commission
The Consumer Product Safety Commission (CPSC) is a federal regulatory agency that oversees the safety of consumer products. It is responsible for regulating and monitoring the safety of thousands of types of consumer products, including toys, batteries, infant products, and clothing. If a manufacturer finds a product safety issue with a product that is manufactured in the US, it must report it to the CPSC within 24 hours.
If the CPSC becomes aware of a product safety issue with a product, it may issue a public health notice to inform consumers of the potential hazard and provide recommendations for how to respond. If the CPSC finds a product safety issue with a product that is imported, it may issue a public notice asking importers to stop importing the product and asking customs and border protection officers to stop the product from entering the US.
Importance of Rebutable Vendors
While many companies focus on product testing, quality assurance, and production control processes, it’s also important to choose vendors who prioritize product quality as well. A quality vendor will likely have robust quality control, inspection, and testing practices in place to ensure that products meet safety regulations and are free of defects. They will employ traceability practices to be able to identify what raw materials were used to make a product and where those raw materials came from.
Why are Product Recalls Important?
Product recalls can pose a significant financial risk to manufacturers. In addition to the costs associated with pulling the products from the market and reallocating resources to managing the recall, there can be reputational damage that affects future sales. A recall can also pose significant health risks for consumers. In some cases, the product may be life-threatening. If a product is recalled, consumers should stop using the product and dispose of it.
When Should a Company Issue a REcall?
If there is a safety concern or other quality issue with their products that could cause injury or death—for example, if they contain high levels of lead or mercury—then they must issue a recall immediately. In some cases, this is done before any injuries have occurred; in others, it happens after injuries have already occurred because of defective products causing harm.
Actions to Take Before a Recall
If you think a product recall may be necessary, there are a few steps you can take before issuing a full recall. If you discover a safety issue with a product, you should report it to the appropriate regulatory authority. In the US, this would be the CPSC; in other countries, it may be a different regulatory agency. If you believe a product may be defective, you can ask a regulatory authority for guidance about whether to issue a recall. If you believe a product may be contaminated, you can contact the appropriate regulatory authority for guidance about whether to issue a recall.
Actions to Take after a Recall
Monitor the product recall process to ensure that the products are being returned and disposed of properly. After a product recall, you should examine your production and supply chain processes to identify any areas of vulnerability that could lead to future product safety issues.
How Can My Insurance Help?
In the food and beverage industry, the two primary recall risks are accidental contamination and product tampering. Of the two, accidental contamination is by far the most common. When contamination-related recall occurs, the company’s general liability policy will protect against product-related suits but will not typically cover other expenses that can be a substantial portion of a product recall loss. Other expenses that may require a separate product recall or product liability policy include the following:
Product testing and analysis: This expense may be covered in some plans but not all plans. The most common reason for this exclusion is that testing is considered an inherent risk of producing goods for sale (like food products) rather than being a specific risk related to production methods or handling procedures.
Product liability insurance: This type of coverage provides financial protection for claims related to injuries or deaths caused by defective products. Claims can include bodily injury due to defective design or manufacture; property damage caused by defective products; and wrongful death claims if someone has died as a result of using one of your products improperly (known as “totality” coverage).
Tower Street Insurance Connects You with the Best Insurance Program for Your Specific Needs
As your company grows and your product becomes more widely available, the risk of a product recall or other significant incident also increases. Product recall insurance can provide financial protection against the costs associated with a product recall. By purchasing product recall insurance, you can protect your business and your finances in the event of a product recall. Our agents here at Tower Street Insurance can assess your current coverage for all of your loss control, personal insurance, and business insurance needs.
We would love to set up a meeting to go over your coverage with you and provide you with a coverage gap analysis completely free of charge! Reach out to us today to schedule a meeting and get a quote today.
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