The New Recall Reality: Emerging Exposures + Insurance Impacts

A paradox defined 2025: recall events dipped, but total units recalled soared. We dig into why severity spiked, rising labor costs, tariffs, supplier churn, and a two-speed regulatory landscape, and what that means for your insurance program. With CRC Casualty Brokers John O’Malley and Chris Martin, we connect market signals to real exposures, from food’s massive unit surge and undeclared allergens to ingredient supplier liabilities that turn a one-dollar input into a six-dollar downstream loss.

For retail agents planning ahead to 2026, we lay out a focused playbook with a simple goal: cut detection time, contain unit counts, and ensure your policy responds when the stakes jump from a nuisance to a balance-sheet event.

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Transcript

Welcome

Amanda Knight 0:22

Welcome back to the Placing You First podcast, where we unpack market trends and the risks shaping our industry. I'm Amanda Knight.

Scott Gordon 0:31

And I'm Scott Gordon. Today we're taking a close look at one of the most important developments of the past year: product recall trends and the rising severity behind them.

Amanda Knight 0:41

2025 brought a surprising dynamic that I don't know, I don't know that everybody saw this coming. There were actually fewer recall events, but a dramatic increase in how many units were affected by recalls. So back in Q1 of 2025 alone, recalls dropped slightly, but the total number of units spiked by almost 25%. That's a pretty major shift in the marketplace. And uh I think it has some real implications.

Scott Gordon 1:10

Yeah, and that shift does have real insurance implications. And today we've invited two CRC casualty brokers from our Minneapolis office, old pros, at the podcast here, John O'Malley and Chris Martin. They're here to help us write down what happened this year, what's driving bigger and more important complex recalls, and what retail agents need to watch going into 2026.

Recall Pop Quiz

Speaker 1 1:36

This is the Placing You First Podcast from CRC Group.

Amanda Knight 1:40

This podcast features news and insights from a vast knowledge base of more than 5,500 associates who write more than 30 billion in premium annually.

Speaker 1 1:48

Plus, we give you the latest information on what's happening at CRC.

Scott Gordon 1:53

It's the Placing You First Podcast, and now the host of the podcast, Amanda Knight at Scott Gordon.

Amanda Knight 2:00

John and Chris, welcome back to the show. Anytime. So I thought to kick things off today, we'd start with a little recall pop quiz. John, Chris, no pressure, but your reputations are on the line here. So all right.

Scott Gordon 2:18

Drumroll, please. Question one. In Q1 2025, recall events actually decreased. But how much did the total number of units recalled increase by?

Amanda Knight 2:32

Hint. I hope you were listening.

Scott Gordon 2:35

Are the answers should I give the answers? Give them the A. Yeah. A five percent, B 12%, C 25%, or D 100%.

Chris Martin 2:48

I mean, I know the answer is C, but I, you know, the question is, would we know if she hadn't just said it?

John O'Malley 3:01

Final answer, C, 25%.

Amanda Knight 3:03

Excellent. Okay, you've got 100% so far.

Scott Gordon 3:06

It did. It did. Uh the total number of units recalled increased by 25% in the past year. So question number two: which of these is one of the most common causes of food recalls? A, is it A, salmonella? B, foreign materials, C, undeclared allergens, or D, spoiled milk?

John O'Malley 3:29

Well, that one's pretty easy. It's been the same way the past several years. I'm going to go with C, undeclared allergens.

Amanda Knight 3:36

Really? I like it. I would have gone with salmonella. I feel like that's the one always in the news. I'm glad you know more than me.

Scott Gordon 3:42

I would have gone with spoiled milk simply because of my mom's chastising me. Uh is C, you're correct, undeclared allergens, which means they're in the country illegally. Question number three. Which industry saw the lowest number of recalled units in 12 years in early 2025? Is it A pharmaceuticals, B automotive, C, medical devices, or D kitchen appliances?

Chris Martin 4:11

Any guesses? I mean, I know the answer because I just read it. Yeah, but I I wouldn't have guessed this one to be honest. Um, but I think it's automotive.

Scott Gordon 4:21

That sounds good to me. You are both correct. It is automotive. Only 3.73 million units were recalled. That's the lowest since 2012. So yeah, a lot of cars. Yeah.

Chris Martin 4:35

I would have guessed medical device.

Amanda Knight 4:37

I think the reason we don't think about that is they still make the news, right? Like those are the ones that you see that make news headlines. So I guess I would have to read the next one.

Scott Gordon 4:45

And we all get the uh little postcards in the mail. Uh well, that's not for the total car recall. That's for like an air conditioning or something. Okay, so question number, last question. Your reputations are on the line. We're all in on question four. What's the most unexpected thing that has ever been recalled in U.S. history? And this is subjective, but A, toasters, B, toilet seats, C, Christmas lights, or D backpacks.

John O'Malley 5:15

I I mean, just to be unexpected, I I would have to say toilet seats, but you know, it could be it could be any of those.

Chris Martin 5:24

I think the other ones I've you know for sure all seen recalls on. So I would agree.

Amanda Knight 5:30

What is it, Scott?

Scott Gordon 5:32

Yes. The shocking true answer is B toilet seats. More than two million toddler toilet seats were recalled due to pinching hazards. Owie. Ouchie. Yeah. Ouchy. Yes. On their little the little toddler little toddler took us getting pinched in the toilet. That's no fun.

Amanda Knight 5:50

Guys, you got a hundred percent. Good job. You saved your reputations.

Scott Gordon 5:55

Well, on that note, uh 100%. Very good. Uh let's dive into the big picture. Early results in 2025 surprised a lot of people. Fewer recall events, but significantly more units recalled. Why are we seeing this rise in severity?

Severity Rises As Events Fall

John O'Malley 6:13

Yeah, I think there's a couple factors. I think there's economic factors and then regulatory factors. And on the economic side, you have you know higher labor costs, tariffs, things like that that are cut cutting into margins. So you have these businesses that are trying to cut costs. Maybe that's um as a result of you know limited quality control. Um maybe they're rushing product out the door because they got to meet their numbers and they they gotta you know sell more product in order to make up that that profit. Um, and then on the regulatory side in the US, we're we're seeing a reduction in in regulatory um oversight. And so I think all those things combined are are leading to maybe delayed detection in in recalls.

Amanda Knight 7:01

With that sort of big picture in mind, let's dig into some industries. Which sectors maybe saw the most disruption in 2025?

Chris Martin 7:10

Yeah, I think again, like, you know, understanding that the um the number of actual recalls was down in a lot of cases, but as far as units go, the food units were way up. Um so I think that was like you know, multiple hundred percent increase, I think, in units recall.

Amanda Knight 7:27

Yeah. Um over 200%.

Chris Martin 7:30

Yeah, and I think that goes to you know, a couple of John's points. You know, certainly uh, you know, a reduction in regulatory activity is probably somewhat um, you know, the cause of that. And then different suppliers uh due to tariff issues or other things, you know, people just you know tightening belts and searching for a cheaper way or a better way uh to get product, and then those avenues being sort of less vetted than normal, I think is probably another big uh reason for some of those increases.

Scott Gordon 8:05

Yeah, so it seems like across the board the trends point to the perfect storm, if you will, economic pressures, tariffs, supplier instability, and softer oversight. So which of those factors, though, do you think has had the biggest impact?

Amanda Knight 8:20

Can you narrow it down to one? Do you have favorites?

Scott Gordon 8:25

Which horse is your money on?

Economic And Regulatory Drivers

John O'Malley 8:27

Yeah, I I think economic pressures is definitely it kind of leads into everything, right? So that's that's where you see the cost cutting. You see, you know, changing suppliers to find somebody cheaper. You see tariffs that are affecting this, that maybe they're using a supplier in a country that has a high high tariff, so now they're going somewhere else, or maybe they don't know that supplier as well, they don't know their quality controls, um, but they have to do all these things to cut those costs um so they don't eat into their margin. So I would say economic pressures is probably the main driver.

Chris Martin 9:00

Yeah, I agree. And I I want to even add to that, like just within companies, the economic pressures. So they're you know, whether it's changes because of tariffs or anything else, or supplier costs, all those things are causing their margins to go down. And so they're looking for places that they can cut. And one of the places that they can probably find room to cut is maybe in their own quality control. Um, so I think you know, what we you know, we tended to see like companies have QC measures and plans in place, but a lot of times they're not actually adhering to those, and some of that might be due to reductions in staff in those areas.

Amanda Knight 9:42

And when I think, you know, we talked about sort of the macroeconomic conditions, the conditions even inside a company itself, but then if you go back out sort of to global dynamics, Europe tightened regulations while the US enforcement softened. So you've sort of got a two-speed environment, right? Where you've got different requirements on both sides. So if you are in a manufacturer who, you know, sells or manufactures on both sides, that feels like a catch-22.

Chris Martin 10:15

Yeah, for sure. It is weird. But um, you know, usually those things would tend to I think trend in the same direction between different countries or you know, but it's interesting.

Amanda Knight 10:27

Right. I mean it seems like tariffs and thinner margins would so would sort of reduce testing. But then you've got, like you mentioned, supplier swaps generating quality issues that are then not going to be caught if you've reduced testing. And it just seems like a vicious cycle.

John O'Malley 10:43

Uh yeah, I I agree. I think it makes it very difficult for someone in the US who has manufacturing under lighter restrictions and then selling to a country that has um more tighter restrictions, uh, that makes it difficult. And especially when the quality control might not be up to par where it was a few years ago, uh, that makes it uh difficult.

Food Recalls Surge In Units

Amanda Knight 11:06

So let's sort of translate this now into insurance impact. So when severity grows like this, not necessarily, you know, the overall number of recalls, but the number of units, where do insureds tend to feel it first? Um do they just is it just gonna hit them with greater costs if they're caught in a recall?

Chris Martin 11:26

Yeah, I would say, I mean, it's a it's a real balance sheet issue, you know. I mean, if you if you have a recall that was a million dollar recall, but in this new environment, because of these factors we've been discussing, it's now a three million dollar recall. Well, those are those are real, you know, balance sheet type issues and you know can be, depending on how big they are, you know, they can be like solvency type issues. So, you know, it's it's it becomes a huge deal when these um you know recalls grow in size and scope.

Scott Gordon 11:58

So what kind of losses do you find catch clients off guard the most frequently? So like cleanup costs, is it BI? What is BI? I should know what that is.

Amanda Knight 12:08

Business interruption?

Scott Gordon 12:09

Business interruption? Yeah. Or uh brand rehabilitation. What what caught what catches clients off guard? Cleanup costs, brand interruption, brand rehabilitation, or third-party claims?

John O'Malley 12:22

I I think that probably depends on the on the business and what they're doing. Um, you know, an ingredient supplier is gonna have vastly different costs than than a finished good company. Um But I think ultimately companies are are pretty concerned with their business interruption, you know, their income, their loss of profit, their sales, things of that nature. But I think what's gonna catch them off guard are the things they're not thinking about. So, for instance, the third party claims for an ingredient manufacturer. If I'm a cheese manufacturer, I'm providing my cheese as an ingredient going into salad kits. I'm I might just be worried about my cheese. You know, my $1 cheese might go into a $6 prepared salad. That might be out of mind. I might not be thinking about that $6 salad. But if my cheese is contaminated, my $1 cheese is now a $6 loss. Right. I think that that will catch some off guard.

Amanda Knight 13:18

Well, you know, and I think about you know, something like a food where it gets into the supply chain, and then like you said, the cost grows exponentially. But I also think of the risk for like think about the the baby formula recall that was at the end of 2025, and like 50 babies were hospitalized. Thankfully, none of them passed away. But like, you know, when babies are harmed through infant botulism or and they never found the cause, if I if I have caught up correctly, they never really figured out what the source of of the contamination was. But if I'm a young parent and I am looking for the right baby formula, you are off my list forever. You know, something like that. You have such like in in food chain supplies, I feel like sometimes we feel like it's inevitable, right? Like you don't want it to happen, but we we know sometimes at risk. But man, if you're doing something like baby formula and and you've got a recall, I don't that's hard to recover from, it would seem to me, especially from a reputational perspective. Like if you can find insurance that's gonna help you sort of catch that early and recover and handle that crisis, that seems like a slam dunk to me.

Chris Martin 14:34

Yeah, that's probably the other big way that they get caught off guard is that reputational damage. Um, because you can, you know, that can just lead to loss of contracts and all kinds of things that are that are gonna be huge expense issues.

Amanda Knight 14:47

Well, I mean, and we live in the age of social media, so there is no way that n everyone in the world doesn't know about that immediately once it happens, right? I mean your reputation can be harmed so much more quickly and thoroughly than maybe it could have prior to this digital age.

Two-Speed Oversight: US Vs Europe

Scott Gordon 15:06

Yeah, I think now you just don't want it to go viral to coin of fret, you know. It's like certain things are synonymous with this stuff, maybe not recalls, but like you've got BP and Enron and just these names that kind of ring with just bad, bad legacies.

Amanda Knight 15:20

Well, in this world, we all hate on the bagged lettuce. Let's be clear. They're the villains of the recall world.

Chris Martin 15:25

Right. It's tough.

Amanda Knight 15:29

So if you are a retail agent listening today, what are the most important actions they can take to prepare insureds as as we head into 2026?

Chris Martin 15:40

Yeah, I think first of all, you know, for sure, making them aware that the protection is available, I would say, is is you know number one on the list. Um, also talking about some of these issues that we've been talking about, like, you know, the tear-up issues, the the supplier issues, the delayed inspections. I mean, these are things that you know, there's literature, literature out there on, and they can read about these things and try to be more prepared and kind of look for, you know, the obvious um, you know, holes that people fall in with these issues, but uh primarily to make them aware that there's coverage available.

Amanda Knight 16:19

And not only is there literature out there, but they've got their CRC brokers. When in doubt, reach out to your broker, have that conversation if there's something you don't understand or you want to know more about. I think it's also a it seems to me it would be a prime time to revisit limits in the current environment. Are the limits you purchased last year enough for this year?

Chris Martin 16:40

Yeah, 100%. I think uh we've seen this for very different reasons, but we've seen this in other parts of the insurance world in the last couple of years where casualty insurance, you know, you've had an average loss go from X to you know some multiple of X. And that's been kind of the norm and it's driven, you know, the need for higher limits. And I think now that's kind of come into the recall world again for different reasons, but uh at the same time, you know, definitely a good time to review those.

John O'Malley 17:09

Yeah, absolutely. I agree with everything said. I you know, for a retail agent, I I would say just become educated so you can educate your clients and use your CRC brokers to help you do that. Um, and revisiting limits for those clients that have current insurance is definitely a must. Um, like we've been talking about this whole time. But you know, we're seeing that yes, maybe maybe their sales aren't where they were last year, maybe they're the same, but the products that they're pushing out the door is significantly higher. So that does increase the uh the risk when there is a loss, and you might need more limits, even though your sales might be stagnant or or lower than last year.

Scott Gordon 17:51

Well, and I know you both touched on this, but let's get down to brass tax on what are some of the main red flags that brokers should watch for during onboarding or renewal conversations with people.

Insurance Impact And Balance Sheet Risk

Chris Martin 18:04

I would say, you know, things like changes at the quality control level at in organizations, like if you've got new CFOs, new QC managers. Um you know, changes there. Uh certainly, you know, big supplier changes are things to look out for. Um, you know, any kind of regulatory changes that have come down uh that they need to be made aware of, um, things like that.

John O'Malley 18:33

Yeah, make sure, make sure the documents are in order, make sure their documents are updated, their recall plans, quality control plans, make sure they're reviewed. They haven't been reviewed in a while. Um it's probably a good time to do that. Um definitely check into that.

Chris Martin 18:49

Yeah, maybe check in with us to see if there's been you know recalls in this particular space recently.

Amanda Knight 18:56

Well, it would seem like we don't just want to have a plan on paper. We want to make sure that we've like maybe done some tabletop exercises or something to ensure this is the right plan and we actually know how to execute it, and it's not a plan we just put on paper because somebody said we should have one, but we don't actually know how to execute it.

John O'Malley 19:12

Yes, very good point.

Amanda Knight 19:13

All right. Guys, you made it through the hard part. Yeah. Congrats.

Scott Gordon 19:17

Thanks for guiding us through what are certainly uh different times, I guess to put it mildly. But uh, we've made it to rapid fire round. Are you guys ready to answer some uh rapid fire questions?

Amanda Knight 19:29

I like these. I feel like I I did a good job on these Scott on these Scott, don't you think?

Scott Gordon 19:34

These two are just bursting with enthusiasm. Let's get this over with. Uh number one, for the first question: favorite guilty pleasure snack.

Amanda Knight 19:46

Forget your New Year's resolutions. Now is not the time for those. Favorite guilty pleasure snack.

Chris Martin 19:52

I mean, the first one that comes to mind for me is combos. I'm a big combos guy.

Amanda Knight 19:57

Yes.

John O'Malley 19:58

I haven't even seen those in a while.

Amanda Knight 20:00

Go to any gas station, man.

Scott Gordon 20:03

I was gonna say, I only get them when I'm on like a road trip.

Amanda Knight 20:06

That's why they're a guilty pleasure.

Scott Gordon 20:08

And then I'm looking around the car for something to drink. Like, where's a drink? These things are making me thirsty.

John O'Malley 20:14

Uh, for me, I I I don't know if it's a guilty pleasure, but it's just a snack that I always go to and just chips and spicy salsa. The spicier the better.

Amanda Knight 20:23

Okay. I also am salty over a sweet snack any day. Salty and crunchy.

Scott Gordon 20:27

All right. Number two, what what's a movie you will always stop and watch when it's on?

Amanda Knight 20:33

Like you can pick it up anywhere. It doesn't matter where you are in the movie. You're like, oh, this is a good one.

Chris Martin 20:38

Yeah, I'll go, I'll go Clue. You guys remember Clue?

Amanda Knight 20:42

Yep.

Chris Martin 20:42

I don't know. Some of us might different endings. Yeah, yeah. Is a great movie.

Amanda Knight 20:48

I've got two, but John, you go first.

John O'Malley 20:50

I mean, my favorite movie is Force Gump, so that would probably be top for me.

Amanda Knight 20:55

That was one of mine. It doesn't matter when it's on TV and you walk by wherever it is in the movie, you can just stop and know exactly what's happening. I feel the same way about Castaway with Tompkins.

Scott Gordon 21:08

Wow. That's a long movie.

Amanda Knight 21:11

I know, but that's the point. You can just like get up and go do something else and you come look.

Scott Gordon 21:18

Is he still on the island?

Amanda Knight 21:21

And then my third one would be uh Shawshank Redemption. Anytime that's on, I can just pick right up. What about you, Scott? You love movies. I know you love it. I love movies.

Scott Gordon 21:32

Most of them most of my favorite movies don't come on that often, so it's not like I'm seeing them a lot, but Die Hard is definitely one I will stop dive into, yeah. Especially this time of year. I wanted to watch it, my wife won't let me, though. So I'll watch it sometime when I'm alone.

Amanda Knight 21:47

Yeah. All right. One question left, Scott.

Scott Gordon 21:54

Oh, yeah. The third question. Sorry. What is one city you'd love to visit next?

Amanda Knight 22:00

Maybe you've been there, maybe you haven't.

Chris Martin 22:02

Are we uh are we are we worldwide or domestic?

Amanda Knight 22:05

Yeah, let's go worldwide. Think big.

Chris Martin 22:08

Okay.

John O'Malley 22:09

Anywhere warm.

Amanda Knight 22:10

That's true. You guys are in Minnesota. So how much snow are you looking at right now? I'm kind of scared.

John O'Malley 22:14

Yeah, right.

Chris Martin 22:16

It's not it's not too cold right now, but it's snowy. But I would say I was gonna go a different direction. I would say. Say um I've always wanted to go to Montreal. There you go.

Amanda Knight 22:26

I've never been.

Chris Martin 22:27

Never been.

Amanda Knight 22:28

It sounds like a good one. Okay, so you go and you report back, and then we'll know if we all need to add it to our list or not. All right, Scott, get us out of here.

Scott Gordon 22:37

Oh. You didn't want to answer, Amanda? Did you answer?

Amanda Knight 22:40

Oh, no, I don't have any on my bucket list right now.

Scott Gordon 22:43

I mean, maybe like someone right now. I'd like to see Rome before I kick.

Amanda Knight 22:48

Been there, it's good.

Scott Gordon 22:49

But anyway, so that's it. We had a great time. Everyone, John, Chris, thank you as always for joining us. You're old pros at this now. It's always a pleasure. Thank you very much. Hey, thanks for having us. That was awesome.

Amanda Knight 23:02

And to our listeners, you can find more insights, including the full written article on this topic at CRCgroup.com. You can also reach out to your CRC specialty producer to talk about recall risk strategies for 2026. Thanks for listening, and we'll see you next time.