What does the Samsung smartphone recall mean for insurers?

As company is forced to recall millions of its products, how are insurers affected?

Insurance News

By Lucy Hook

Last week, electronics-maker Samsung announced what could be the biggest smartphone recall ever, after reports of ‘exploding batteries’ in its new Galaxy Note 7 model.

Samsung announced a global recall of some 2.5 million devices following around 35 reports of batteries that exploded or caught fire when charging – a significant risk to owners.

The company said that “customer safety” was the most important factor in the decision to recall the Note 7 phones, which were only released on August 19, according to BBC News.

The unprecedented scale of the move has been described as “extraordinary”, and is no doubt a costly blow to Samsung.

But what are the implications for mobile phone insurers?

“The issues that Samsung have had are manufacturer-led issues that will have to be protected under the manufacturer warranty,” Mark Gordon, CEO & founder of Pier Insurance, told Insurance Business.

“As an insurer, you’re generally only on the hook once the manufacturer’s warranty expires, and then you’re covering the extended warranty of the phone,” Gordon said.

In practical terms, this means that for a case such as the Samsung recall, the consumer’s next steps would be to head straight to the manufacturer, or to the retailer that supplied them with the device.

In fact, in most cases of manufacturing faults – so long as they are identified early on in the lifespan of a phone – they should be dealt with by the manufacturer and not the insurer, Gordon explained, meaning the consumer should side-step the insurer altogether.

In the case of Samsung’s potentially explosive batteries, there’s a clear risk of harm resulting from the fault. Are insurers liable for this?

No, according to Gordon, who said that these kinds of injuries are not typically covered by mobile phone insurance.

“If someone burns themselves off the back of a phone getting hot, or something burning out on the phone, that becomes a liability and consequential loss that wouldn’t be covered,” he explained.
“Our policies cover purely for the device and the hardware.”

Whilst it seems that in the case of the Samsung recall, the responsibility lies firmly with the manufacturer, insurers may still find that their policyholders turn to them for advice.

Insurers should be advising clients to go straight back to Samsung, Gordon said, adding that the company would likely post information for device-owners online.

Ultimately, mobile phone insurers are unlikely to be negatively affected by the recall, he said, adding: “We certainly wouldn’t be looking to amend any pricing off the back of this issue.”


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