Three chemicals used in the production of cosmetic products have been found to pose liability risk, a new report has found.
The report according to Allianz Global Corporate & Specialty SE (AGCS) and Praedicat examined how chemicals commonly found in beauty products may place manufacturers and suppliers at significant liability risk as well as their potential impact on the insurance industry.
The cosmetics industry uses hundreds of chemicals in manufacturing, dozens of which can be present in the final product, leading to potential consumer and workplace exposure, particularly in nail and hair salons.
Three chemicals have particular notoriety for their use in nail polish – dibutyl phthalate (DBP), toluene and formaldehyde. Scientists have identified this “Toxic Trio” of chemicals, which are also used in perfumes, body lotions and other personal care products, as hazardous.
In Africa, the beauty and skin industry is not well-regulated, making it a lot more risky for consumers to get exposed to dangerous chemicals. Currently, there is a rising trend in skin bleaching and it is estimated that over 70% of women in Nigeria are using skin lightening [i]products. This phenomenon is creating concerns around increasing health issues that may be caused by these products. Many of these skin lightening products are easily accessible in the region, despite them being banned in countries such as South Africa, Mali and Cote d’Ivoire[ii].
With global sales for skin care products estimated to grow by 40 percent to $180 billion by 2024, manufacturers and suppliers face liability risk if bodily injuries are linked to “Toxic Trio” exposure. These risks include:
Product recalls if a product containing one of the “Toxic Trio” is deemed risky to consumers by regulators, whose attention is increasing.
Product mislabeling is a growing threat. Manufacturers who market their products as being “three-free” could be held liable if their products contain any of these chemicals, even if it is not their fault.
Latent liability from DBP affecting both consumers and workers has the potential to generate in excess of $100 billion in losses to the U.S. economy, based on Praedicat’s model estimates, due to the broad exposure.
“Companies need to implement rigorous testing to reduce the risk of mislabeling and proactively monitor scientific literature to identify future risks rather than reacting to public perception or regulatory action,” said Michael Hohmann, Global Head of Liability at AGCS. “By leveraging science-based business intelligence from Praedicat, AGCS helps clients make more informed decisions about the chemicals, products, substances and processes involved in their business.”
Insurance companies currently offer general liability and standalone product recall policies to assist companies with the significant costs that could occur from a “Toxic Trio” event.