Product recall insurance is a better bet than luck.
Two years ago, very few consumers had heard of a company called Takata that the largest producer of automotive safety equipment. Then as quickly as an airbag deploys, the company’s fortunes changed.
A few days ago, I received a message from the Ford Motor Company in the form of a recall advisory notice. It appears my little red Ford Ranger has a product imperfection that will be replaced – when the parts are available. I was told my local dealer will then contact me to set an appointment to have them installed.
Over the years, I’ve had a number of cars recalled to have vehicle repairs made and it was never a big deal. Once I had a door latch that locked shut, another time an emission control failed and a few years ago an additive was needed for the transmission. All these items were repaired with little inconvenience on my part.
That changed for me as I read the reason for the last recall notice. It seems my trusty truck has a defective airbag. Suddenly I didn’t feel real good about this news.
I had been aware of the Takata Airbag problem for some time and had seen the news reports detailing the eight fatalities and more than 100 injuries linked to these safety devices over 15 years (1987-2012). I had also watched a news report of a lady who had an airbag discharge when she was driving, sending bits of steel into her body and permanently blinding her. I thanked heaven that (at the time) none of my current vehicles was listed in those warnings. Unfortunately, Ford’s notice made my Ranger part of the recall.
Luckily Ford is working on the problem and because it is unlikely that one of these horrific injuries might actually happen to me, the company said not to worry (too much). Unfortunately the recalled airbags for all types of vehicles now total more than 34 million. So switching them all could take years, even as other suppliers race to support this recall effort.
While my angst as a consumer is evident, the liability Takata has is massive. Only one recall would be as larger than this one and that was the 2004 recall of 150 million pieces of Chinese made toy jewelry that may have contained lead. While Takata is deemed by the industry as too big to fail, it’s loss will be substantial.
Product Recall Insurance
So how does a company protect itself from a disastrous recall? Most companies purchase “Product Recall Insurance”. Most companies consider product recall insurance to be one of the most important types of insurance for companies that pursue global commerce. As government oversite grows the need for this insurance grows exponentially.
Product Recall Insurance is a policy designed to reimburse companies for losses they sustained because one of their products caused or would cause bodily injury or property damage.
While this insurance may (or may not) protect Takato from the recall of 34 million cars, those who do not have product recall insurance should consider this piece of Dirty Harry’s advice; “You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”
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