The product liability landscape is changing. Set out below are some of the key emerging trends, which will impact on Insurers and businesses alike.
The long-awaited report from Professor Elliott, which was commissioned in the wake of the “Horsegate scandal” was finally published on 4 September 2014. His recommendations called for the establishment of a food crime unit (to which the Government has committed), and highlighted that regulators need to take a more robust stance towards infractions, with thorough investigations, prosecutions and the imposition of heftier penalties. His report also highlighted the need for a far tougher enforcement regime, more audit and scrutiny of parties in the supply chain. With supply chains becoming increasingly complex and global, this new regime will pose challenges for Insureds and Insurers alike.
As the article elsewhere in this bulletin demonstrates, opinion remains divided as to whether the perceived benefits of e-cigarettes as a potential aid for giving up smoking outweigh their unknown and potentially harmful effects on health. E-cigarettes are not currently regulated in the UK (and will not become regulated until 2016). As such, the potential health implications and risks associated with the use of e-cigarettes are not clearly defined.
Given the uncertainties regarding the risks surrounding e-cigarette use, the insurance industry has adopted a cautious approach insofar as providing cover for risks associated with e-cigarette use is concerned. As the potential health implications of e-cigarettes become clearer, and when their use becomes regulated, it is anticipated that Insurers will more readily engage with this evolving industry.
Nanomaterials are widely used in the textiles, cosmetics, food and pharmaceutical industries, to name but a few. There is much debate surrounding the possible health and environmental effects of the use of nanomaterials, and a call for an adequate regulation regime to manage any health and environmental risks associated with their use.
With increased use of nanomaterial and/or consumer awareness, potential liability risks to manufacturers will increase also. Manufacturers will seek to minimise their exposure to such risks through appropriate risk assessment, testing of their products and ensuring that they are au fait in terms of their knowledge of the attributes and effects of nanomaterials.
The UK government has committed £10m of funding for the testing of driverless cars on Britain’s roads. This commenced in January 2015:
- Bristol, Greenwich, Milton Keynes and Coventry are running formal trials that will last between 18 and 36 months.
The intention is to establish the UK as the global hub for the research, development and integration of driverless vehicles and associated technologies.
The project will investigate driver behaviour of driverless cars, and will monitor how pedestrians interact with the vehicles. Risk, liability, regulatory and insurance issues will also be researched. It is hoped that the research will enable driverless cars to become a reality, and to be integrated into the existing UK transport infrastructure.
This research and advance in technology presents a significant business opportunity for insurers, although no doubt a cautious approach will be adopted given the unknown risks at present. It is certainly conceivable that product liability insurance could become more important than motor insurance in the future. Time will tell.
Globalisation of risk
Product liability exposure will become more global, as manufacturers are increasingly marketing their products internationally. Supply chains are becoming more convoluted and complex. Social media is a double edged-sword – on the one hand it is a powerful marketing tool, on the flip side it can cascade any negative comments about a product on a global scale at an alarming rate thereby fuelling an appetite for consumer litigation.
It is therefore likely that multi-jurisdictional litigation (and increasingly on a class-action scale) will escalate. Companies and insurers will need to be prepared for this, and in particular will need to become familiar with different (and increasingly stringent) regulatory regimes applicable in different countries Whilst this does offer insurers the opportunity to expand into more global markets, such a strategy will bring with it increased liability risks for their book of business.