Automotive recalls account for over 70 percent of the value of all losses analyzed, which is unsurprising given recent record levels of activity in both the United States and Europe. “We see an increasing number of recalls with higher units in the automotive industry,” says Carsten Krieglstein, Regional Head of Liability, Central & Eastern Europe, AGCS. “This is driven by factors such as more complex engineering, reduced product testing times, outsourcing of R&D and increasing cost pressures. The technological shift in the automotive industry towards electric and autonomous mobility will create further recall risks.”
One of the largest recalls to hit the auto industry to date, involving defective airbags, is expected to result in some 60-70 million units across at least 19 manufacturers being recalled worldwide. Costs have been estimated at close to $25 billion. This incident exemplifies the growing “ripple effect” which impacts the automotive sector, but also other industries. Given the use of many common components, a single recall can impact a whole industry.
Food and beverage is the second most impacted sector, accounting for 16 percent of analyzed losses with the average cost of a significant product recall claim almost $9.5 millio (8 million euros). Undeclared allergens (including mislabeling incidents) and pathogens are a major issue, as is contamination from glass, plastic and metal parts. Malicious tampering and even extortion incidents pose an increasing threat, as well as the growth of “food fraud”, which has become a major issue, resulting in reputational damage and major losses, as seen in the horse meat scandal in Europe four years ago.
The report also notes that products from Asia continue to account for a disproportionate number of recalls in the U.S. and Europe, reflecting the eastwards shift in global supply chains and historically weaker quality controls in some countries. Yet increasing safety regulation and consumer awareness is ensuring recall activity is also rising across Asia.