This FAQ is designed to answer the big questions from organisations preparing for the implementation of the revised EU Product Liability Directive. It is aimed at manufacturers, technology providers, importers, compliance officers, legal teams, risk managers, and insurance professionals.
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Does the product contain software, AI or digital components?
The new Directive explicitly includes software and AI systems as products.
Key underwriting questions:
- Does the product rely on software to operate?
- Is AI used in decision-making?
- Are there algorithmic updates or machine learning features?
Risk issue
Software defects could lead to:
- Bodily injury
- Property damage
- Financial loss
This may create systemic product failure risk across thousands of devices.
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How are software updates and patches managed?
The Directive recognises that post-sale updates are part of the product lifecycle.
Key underwriting questions:
- How often are updates released?
- Are security vulnerabilities patched quickly?
- Who is responsible for updates (manufacturer, developer, supplier)?
Insurance concern
A defective update may create simultaneous large-scale failures, increasing the likelihood of mass claims.
Example exposures:
- Autonomous vehicles
- Connected medical devices
- Industrial robotics
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What cybersecurity protections exist for connected products?
If a product can be hacked, courts may consider it defective if it leads to harm.
Key underwriting questions:
- Are penetration tests conducted?
- Is there vulnerability monitoring?
- Are security patches mandatory?
Worst-case scenario
A cyber vulnerability could affect millions of devices globally.
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What product safety testing is performed?
The Directive allows courts to consider non-compliance with safety requirements when assessing whether a product is defective.
Key underwriting questions:
- Product testing documentation
- Certification evidence (CE marking etc.)
- Regulatory compliance
Industries of concern
- Medical devices
- Industrial machinery
- Electrical products
- Consumer electronics
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How transparent is the supply chain?
Liability can extend to:
- Component suppliers
- Importers
- Distributors
Key underwriting questions:
- Where are components sourced?
- Are suppliers contractually responsible for defects?
- Are indemnities in place?
Supply chain defects are a major source of claims.
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What chemicals or hazardous materials are used in products?
This is particularly important for latent injury risks.
Examples of high-concern chemicals:
- PFAS
- Endocrine disruptors
- Microplastics
- Heavy metals
- Pesticides
These exposures may produce claims decades later.
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How are customer complaints and defect reports handled?
The Directive increases the importance of internal documentation and traceability.
Key underwriting questions:
- Is there a formal incident reporting system?
- How quickly are defects investigated?
- Are recalls conducted when necessary?
Failure to act on complaints can increase liability.
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Are products capable of autonomous operation?
Autonomous products present high-severity liability risk.
Examples:
- Self-driving vehicles
- AI medical diagnosis
- Automated manufacturing robots
Key underwriting questions:
- Who is responsible for decision-making errors?
- Are fail-safe systems in place?
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How long is the product lifecycle?
The Directive allows latent personal injury claims up to 25 years in some cases.
It is important to understand:
- Expected product lifespan
- Maintenance and support period
- Software support duration
Products with long life cycles create long-tail liability exposure.
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What crisis management and recall plans exist?
Product recalls are often the first signal of major liability losses.
Key underwriting questions:
- Is there a recall plan?
- Is crisis communication prepared?
- Are distributors able to trace affected products?
Companies without recall planning pose higher loss risk.
For any more information on this topic, please reach out to one of our team:
Sally Roberts, Head of Corporate Casualty, London: [email protected]
Christian Crozier, Head of Corporate Casualty, UK: [email protected]
About Sompo
We are Sompo, a global provider of commercial and consumer property, casualty, and specialty insurance and reinsurance. Building on the 137 years of innovation of our parent company, Sompo Holdings, Inc., Sompo employs approximately 10,000 people around the world who use their in-depth knowledge and expertise to help simplify and resolve your complex challenges. Because when you choose Sompo, you choose The Ease of Expertise™.
“Sompo” refers to the brand under which Sompo International Holdings Ltd., a Bermuda-based holding company, together with its consolidated subsidiaries, operates its global property and casualty (re)insurance businesses. Sompo International Holdings Ltd. is an indirect wholly-owned subsidiary of Sompo Holdings, Inc., one of the leading property and casualty groups in the world with excellent financial strength as evidenced by ratings of A+ (Superior) from A.M. Best (XV size category) and A+ (Strong) from Standard & Poor’s. Shares of Sompo Holdings, Inc. are listed on the Tokyo Stock Exchange.
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