Automobile recalls are issued using a mathematical formula that tries to predict the accident rate of a particular vehicle model with and without a recall. Since this is the main data point used for vehicle recalls, often the data comes back that a recall is unnecessary because the problem doesn’t effect enough vehicles to have a significant statistical impact on the accident rate and thus doesn’t warrant a recall. A 2011 report found that there was no direct correlation between recall rates and accident rates in the United States, despite this fact recall rates continue to rise every year.
Types of Recalls
There are two types of recalls that are issued for vehicles in the U.S., voluntary and mandatory. A voluntary recall basically involves the manufacturer sending a notice to dealerships notifying them of the issue, and if your vehicle is still under warranty you can opt to have the service covered by your warranty. A mandatory recall means that dealerships must make the repair on any vehicle, covered by warranty or not.
How Recalls Get Issued
The NHTSA is the government agency that issues recalls. Not always, but often, the NHTSA relies on the insurance industry to detect issues large enough to warrant a recall. Insurance companies have a strong incentive to report issues because high failure rates of a specific product lead to increased insurance claims. The 2011 major Toyota recall is an example of a recall that was initiated solely because of reporting from the insurance industry.
The Flaw In The System
There are two flaws inherent with this reporting system. The first is that it incentivizes insurance companies to over report issues. The same 2011 study showed driver safety for recalled vehicles increases for 2-3 years post a recall. Essentially, a recall creates a placebo effect which causes drivers to change their driving patterns in a way which decreases insurance claims. Insurance companies can effect their own profits by influencing major recalls and they are the chief reporting mechanism for initiating recalls in the U.S.
The second flaw in this system is that insurance companies have no incentive whatsoever to report issues that don’t directly effect insurance claims. Issues that could be deemed as attributable to other factors or not deemed as major safety risks, but things you still probably don’t want going wrong with your vehicle, never get reported.