Product recalls expected to soar post COVID pandemic, enforcement set to intensify

Sedgwick, a leading global provider of technology-enabled risk, benefits and integrated business solutions published their latest U.S. product recall index report today. According to the findings in the report, the effects of the COVID-19 pandemic continue to keep inspections and recall incidents below record levels. However, as the world begins to re-open and with the prospect of new regulations ahead, an upsurge in recalls should be expected.

The new report reveals the latest recall data, trends and predictions businesses need to know to prepare for the increasingly aggressive and complex regulatory environment that risk managers are forecasting for all industries in 2021.

Sedgwick's industry-leading research and analysis was designed by experts in best practice recall, remediation and retention solutions. Sedgwick works in partnership with clients across all industries to manage risks and minimize the impacts of in-market business and product crises.

Highlights include first-quarter data and predictions for what to expect in the remainder of 2021:

First quarter recall data: 

• Automotive recall activity remained steady compared to quarter four, 2020, but units impacted increased by 82.5%.

• Consumer product recalls decreased 28.8% (compared to quarter four 2020), the lowest number of quarterly events since the first quarter of 2019.

• U.S. Food and Drug Administration (FDA) food recall activity represented a 4.3% decrease in events (compared to quarter four 2020), but a 31.9% increase in units impacted quarter-over-quarter.

• United States Department of Agriculture (USDA) recall events increased by 25% in the first quarter of 2021 compared to quarterly averages in 2020.

• Medical device recalls fell 9.8% (compared to quarter four 2020) resulting in a seven-quarter low. Software issues were the top reason for recalls for the 19th time in the last 20 quarters.

• Pharmaceutical recalls dropped 25% (compared to quarter four 2020) to just 63 events in the first quarter, despite the FDA's work to resume inspection and regulatory enforcement activity in late 2020 and early 2021.

Looking ahead in 2021: 

• Safety concerns related to electric vehicles and their new technology will remain at the forefront. Expect a series of component-related recalls to come in 2021, and for reputational risks and regulatory scrutiny to increase as the National Highway Traffic Safety Administration (NHTSA) faces pressure from lawmakers. As the industry evolves, automotive recall effectiveness will become more challenging.

• Expect consumer product recalls to maintain their typical pace in the near term. However, as the U.S. Consumer Product Safety Commission (CPSC) adopts a newfound approach to oversight and seeks to reinvent itself to better protect consumers; stricter regulatory enforcement, increased legal risks and scrutiny are on the horizon.

• The food and beverage industry will see new food safety rules, increased oversight, enforcement activities and more lawsuits as it emerges from the COVID-19 pandemic. Expect a return to traditional oversight activity and new priorities on from the FDA inspections including protecting infants, children and expanded oversight related to contaminants.

• The medical device industry is on the brink of a regulatory crackdown. The scope of safety investigations will continue to broaden, accelerating innovation will reshape the regulatory framework, and lawyers will aggressively test the waters on the level of immunity the Public Readiness and Emergency Preparedness Act (PREP Act) offers to manufacturers.

• Contamination risks have always been a long-standing risk for pharmaceutical companies. As the industry evolves, expect heightened regulatory scrutiny, litigation and reputational fallout as a result. Meanwhile, independent labs and safety advocates are eager to pursue products that may be placing consumers at risk, and their influence is growing.

 "The COVID-19 pandemic has forced manufacturers to operate in one of the most turbulent and uncertain times in recent history," notes Chris Harvey, senior vice president at Sedgwick. "While consumers are eager for a return to normal, regulators and lawmakers see this as an opportunity to enact major changes that will have ripple effects across multiple industries. For businesses sleeping at the wheel, they stand to lose. We expect to see a surge in recalls as we emerge from the pandemic, rapid technological development, and lingering supply issues that will continue to be a major factor. The regulatory environment has forever changed. Businesses must prepare their recall management, crisis and communications plans now before it's too late."

The recall index is produced by Sedgwick's brand protection experts every quarter. It is the only report that aggregates, and tracks recall data to help industry stakeholders navigate the regulatory environment, product recalls and other in-market product challenges. 

About Sedgwick 

Sedgwick is a leading global provider of technology-enabled risk, benefits and integrated business solutions. The company provides a broad range of resources tailored to our clients' specific needs in casualty, property, marine, benefits, brand protection and other lines. At Sedgwick, caring counts®; through the dedication and expertise of more than 27,000 colleagues across 65 countries, the company takes care of people and organizations by mitigating and reducing risks and losses, promoting health and productivity, protecting brand reputations, and containing costs that can impact the bottom line. Sedgwick's majority shareholder is The Carlyle Group; Stone Point Capital LLC, Caisse de dépôt et placement du Québec (CDPQ), Onex and other management investors are minority shareholders.