How to manage premiums and cover for businesses doing unattended processes

Many insurers have backed out of insuring against unattended processes for various reasons, but the underlying issue is the hardening insurance market. Essentially, underwriters are picking and choosing what sort of risks they can insure less frivolously due to lower reinsurance capacity and higher claims settlements. Ultimately, this type of business is more risky and less profitable for insurers.

Therefore, over the last few years, businesses have endured an insurance market which is reducing its coverage by removing the allowance of unattended processes where previously they were permitted, and some insurers are withdrawing from manufacturing risks entirely.

However, it’s not all over for businesses that depend on unattended processes. Although many machines – especially CNC machines for precision engineers for example – are made to work long runs of the same component with next to no supervision, some of these machines are armed with technology which can shut them down when they encounter production problems and can even be adapted to have non-conductive & non-residue extinguishers automatically discharge when temperature parameters are breached. Many larger manufacturers also have automatic shut offs for electricity on-site when fire alarms are triggered.

That’s great but how do we convert the information into cover?

Firstly, its important that businesses do disclose if they conduct unattended processes. This became even more important after changes in the insurance act meant that the customer has a duty to disclose all material facts which might sway an insurers decision to underwrite the business. If businesses do not disclose information pertinent to underwriters (such as use of heat, unattended processes or even work away from the business premises), the business might not be insured should an incident arise. Therefore, it’s much better to talk to a broker about what the business does and what activities your business undertakes. A great broker will help your business to work out the most viable route to effective and inexpensive cover – even if that means advising customers that it would be cheaper to employ competent overnight staff.

You should talk to your broker about all the positive features of your business regarding how risks (particularly fire risk) are mitigated when the premises are unattended. Some things which would be considered include:

• Age of machinery
• Risk mitigation features such as:
  • Electrical cut-off
  • Extinguishers (automatic/unmanned)
  • Automatic monitored fire alarms
  • Fire risk assessments
  • Fire separation – i.e., non-combustible enclosure for machinery
• How long the unattended processes would be – i.e., 4 hour production run
• CCTV and remote access to machinery diagnostics
• Locality of keyholders
• Locality of emergency services (particularly Fire services)

Insurers might also like to survey a site where unattended processes occur to assess the suitability of the risk management, suggest improvements and, potentially, to also look at potential value of claims should they occur.

It’s important to weigh up the cost-benefit of implementing the risk improvements and, as such, it’s critical to give brokers plenty of time to broker insurance deals and terms to allow business to weigh up full costs including the cost of implementing improvements. The important thing here however is that these risk improvements can continue to reduce premiums for years to come, so may be a one-off cost.

What if your broker still struggles to place the risk?

Of course, nothing is guaranteed to make insurers offer brokers terms to include unattended processes – never mind terms which are competitive compared to manned processes. It is important to note, however, that brokers with large accounts with insurers capable of placing these type of risks will have more leverage and experience to get these risks placed.

If your business is struggling to get cover, it’s worth speaking to a broker with experience of working on unattended processes who can help guide your business and insurance underwriters to the cover you need.

If you’d like to find out more, please contact Jack Durrant by clicking here.