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Auto Component Manufacturers Insurance Policy

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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.

FAQs

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.

No, the claim arised due to contractual product guarantee will not be covered under auto component manufacturers insurance policy. Since contractual product guarantee is an exclusion under this policy so the claim will get rejected. Although, one can include this cover in the policy as an add-on.

In case a notice is issued against the company, that is likely to raise liability, the insured party must inform the insurer. The legal notice must also be sent to the insurer. The insurance company should be contacted immediately about the claim and full cooperation should be extended for better and quick recovery for the claim.

Claims arising because of issues that came up before purchasing insurance are rejected. If an auto component manufacturer is manufacturing and selling outdated models or parts which have been strictly banned by the government and if it is advised to upgrade the technology, the claim arising due to recall or liability of these products will get rejected. An auto component manufacturers should buy both product liability and recall insurance, thus making it easier for auto component manufacturers to settle their claims.

Yes, a case can be filed against the manufacturer of the product, and the seller of the product in some instances. If the product has undergone some change and the damage is due to that change, the individual or company involved in changing the product is also liable for the claim. It is always advisable to avail both product liability insurance and product recall insurance to maintain a financial shield against such cases.

The premium of product liability insurance is usually determined by the risk that product represents. Other factors like deductible, claim history, geographical location, coverage opted, business turnover, country of export, previous loss history and quality control procedure followed by a company are also considered.

Any one accident limit(AOA): Anyone year limit (AOY) defines the ratio which determines the limit of indemnity payable to the insured at the time of claim. For example, 1:2 implies that the maximum liability you can claim is half of the sum insured amount for any claim. The ratio of AOA and AOY is to be selected from four options i.e. 1:1, 1:2, 1:3, 1:4. Premium will be affected on the basis of opted AOY limit.

By following all the quality control procedures in manufacturing the product, one can trim the policy premium rates. Similarly, if the insurer observes that you are acting negligently and not following all the safety norms, you can see a rise in the premium rates. Following proper safety measure to avoid all possible damages or defects can help you trigger a low rate premium amount.

Yes, premium amount will increase if any add-on coverage is included in the product liability policy. Product recall insurance can be added in product liability policy by paying an additional premium. Both product liability and product recall cover play key role in risk mitigation for auto component manufacturer.

When quality standards are not met or when the government ask to recall the product, it results in damaged reputation and huge financial losses. Product recall is a costly and time consuming process and in order to remain financially stable at the time of crisis, it is advisable to have product recall insurance to mitigate the risk of financial loss. An auto component manufacturers should also buy third party liability to get complete protection against litigation.

Someone overseas can sue you in their local court under local law against bodily injury or property damage caused due to defect in your product. You will get worldwide coverage of defence cost under product liability insurance policy.

No, you can not purchase product liability policy without deductible since it is mandatory to include deductible in every liability policy in order to share the risk with insurer. Deductible is the amount which an insured will pay before the insurance company settles the claim. For example, the deductible in a product liability policy is 1 lac. A claim of 20 lacs is been reported so the insured will first pay Rs.1 lac and the rest 19 lacs will be paid by the insurer.

Risk appetite and policy coverages vary substantially by insurers. Policies with large exposure and less frequency of claim, could be served well by some leading public sector insurers. For several high claim frequency policies, some of the leading private sector insurers have strong technology offerings. In case of liability policies, the choice depends substantially on the coverage opted by the client.

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 could cause loss...
Read More

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...
Read More

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,...
Read More

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