This policy covers various expenses incurred in recall of a product with a manufacturing defect (discovered subsequent to its production) to prevent any potential liability that could have arisen due to the use of the defective product.
IRDAI License Number: IRDAI/INT/ISNP/2022/250
This policy covers various expenses incurred in recall of a product with a manufacturing defect (discovered subsequent to its production) to prevent any potential liability that could have arisen due to the use of the defective product.
All industries where use of a defective products by consumer can be a cause of liability claim eg. - pharmaceutical, automobiles, food products, children’s toys, domestic and industrial machinery etc.
The base cover in the policy is for Recall Expenses which includes:
Defense Costs (incurred in consultation with Insurer): Expenses incurred on a liability suit in this regard
Pre-Recall Stage:
In fact identifying the issue & planning a structured recall is a very important step in minimizing the impact of the adverse event. Selecting & hiring a Crisis consultant (with consent of Insurer) to mold the negative public perceptions in favor of the Company is a very useful add on cover.Other minor add ons are:
All the direct costs to be incurred in a recall event should be covered:
These are main exclusions in this policy:
The Food Authority (FSSAI) ordered Nestle India to withdraw all the variants of Maggi instant noodles from Indian markets throughout the country. Based on reports from all over India concerning the lead and monosodium glutamate (MSG) contents in Maggi Noodles. Nestle had to recall all Maggi noodle products from the market and burn the recalled Maggi noodles in concrete incinerators.
Economic Costs: Direct costs: Recall expenses - not quantified Rs. 320 crore worth of Maggi recalled & burnt Indirect impact (NOT covered by Insurance policy) Net profit for the FY 2015 (Jan- Dec) down by 620 crores Share value declined by 10% Market share in instant noodle market fell from 77% in January to 10% (later climbing to 42% in December 2015) the loss in Brand value at 1200 crores. Nestle India only had a CGL (Combined General Liability) cover which included Product Liability ( & not Recall liability).
After putting in place the necessary changes on the packaging, the company went for an all out aggressive marketing to re-align with its large loyal customer base. The tagline was “We miss you too” to help win back the lost market share.
1. Need of an adequate Insurance policy cover for Recall. 2. Correcting the flawed communication strategy of the company in the initial week/ten days to counter the charges being levied against the product.
