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Types of risk faced by Auto Component Manufacturers

Client-related Lawsuit

Legal liabilities arising due to bodily injury or property damage suffered by clients due to faulty products. Losses incurred include cost of lawyer, investigation costs and compensation awarded by the court.

Product Recall Risk

Product recall may arise due to defect in the product that may lead to a bodily injury or property damage to a client or its customers. Cost of dismantling, transportation and repairs can be substantial.

Premises Risk

An accident can lead to own damage or third party loss. Cause could be fire, natural catastrophe, machinery breakdown or sudden pollution. Reinstatement of assets and indemnification of 3rd parties is covered.


Business Interruptions Risk

Inability to resume operations after an accident can lead to consequential losses. Factory may require to be shut down until reinstatement. Loss of profits, and continued standing expenses can be covered.

Cover relevant for Auto-Component Manufacturer

Product Liability Cover

  • Product liability insurance for auto manufacturers handles claims made by your customers when the product malfunctions and leads to a third party bodily injury or property damage.
  • Auto-manufacturer product liability policy covers manufacturing defects, design defects and flaws as well.
  • Incorrect labelling, safety warnings and insufficient instructions are also covered by product liability insurance policy.

Product Recall Cover

  • The cost incurred to recall or withdraw a product is paid by auto manufacturer liability policy and it also offers coverage against lawsuits which can cause reputational damage to business.
  • Loss due to incidences of product contamination or tampering is also paid by the product recall insurance.
  • Product recall insurance will also pay for loss due to withdrawal of product due to governmental announcements.

Industrial All Risk

  • Auto manufacturers should also consider an all risk policy to cover for their property. Insurance will cover offices, machinery, furniture, stocks in trade for any risk except named exclusions. Coverage includes fire, burglary, flood and earthquake
  • IAR covers loss of profits due to fire, natural catastrophes and machinery breakdown.
  • IAR covers injuries at premises incurred by a third party.

Frequently Asked Questions

Product liability insurance and product recall insurance policies are essential for an auto component manufacturer. By paying an additional premium amount, various add-on covers such as property insurance or third party cover can be added in the policy. One can ask for a customized package policy in order to have broader coverage of risk.
Product Recall insurance covers first party and third party cost or financial losses during a product recall. Cost of transportation, disposal, replacement and advertising a recall are reimbursed under product recall policy. Product recall costs are hefty and it can even disturb a financially sound organization so it is crucial to buy this cover in order to gain peace of mind and financial stability.
Yes, this insurance policy provide cover for the settlement of lawsuits. The extent of settlement is determined by the type of the policy and sum insured. It will cover litigation cost, court fees and defence cost. Some insurer also provide legal assistance and out of court settlement. It is feasible to include product recall and third party liability insurance in your risk management portfolio.
Contractual product guarantees and pure financial loss not related to an injury are excluded. Repair or modifications and any fines or penalties by regulatory authorities are generally excluded. Intentional violation of industries or government standards are not covered. Loss due to illegal activities will also be not considered in this policy.

Insuropedia

What is Product Liability Insurance?

A product liability insurance is a policy which indemnifies the distributor, wholesaler and retailer against various losses or damages which could arise out of the consumption or use of products manufactured, sold or distributed by them. As a manufacturer who is supplying products, you always deal with a risk that your products...
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How to Calculate the Premium for Product Liability Insurance?

A product liability insurance plays an important role by covering you against various losses or damages which may arise due to consumption or use of your defected item. The premium for product liability insurance is determined on the basis of the risk posed by product along with factors like quality control procedure, exporting country, business...
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Does principle of subrogation apply to Product Liability insurance? How?

Yes, the principle of subrogation applies in the case of product liability insurance as well. If a product liability insurance company settles the claim, the insurer shall be subrogated to all of the policyholder’s rights of recovering the claim amount if the loss or damage happens due to the fault of the third-party. It means,...
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