Technology has streamlined industrial production, but it has also created new risks insurers must underwrite.
A wave of robotics, wearable tech, and 3D printers have sparked a second industrial revolution. But while these innovations have optimized the manufacturing process, streamlined the supply chain, and promised a safer workplace, those same technological marvels present a host of emerging risks the insurance industry must appraise.
Liberty Mutual recently detailed the advantages — and the risks — associated with this cutting-edge technology revolutionizing the industrial sector in a report on PropertyCasualty360. For all the cost-saving efficiencies generated by these tech innovations, there comes an equal amount of new and advanced risk assessment techniques now thrust upon insurance underwriters. In many instances, insurers are venturing into areas where previous underwriting standards no longer apply.
A New World of Risks
Higher quality outputs, lower costs, and shorter production times have vaulted 3D printers into the forefront of industrial production — and their popularity with manufacturers is expected to grow. These devices are on track to increase their footprint in the manufacturing supply chain with revenues for the 3D printing market projected to hit to $35.4 billion in 2020, up from $15.9 billion in 2016, International Data Corp. reports.
While a boon for manufacturers, 3D printers present a dilemma for underwriters — if the materials used in the 3D printing process come from several sources, who is at fault if the end product fails? Traditional liability insurance may not cover defects in the materials, design, and production of items formed by 3D printers; therefore, insurers must underwrite those unique risks all along a reconfigured supply chain. 3D printers also enable counterfeiters to easily recreate original designs, heightening the potential for intellectual property infringement and theft.
Wearable tech devices, meanwhile, have experienced a similar ascent in the workplace. Whether embedded in clothing or worn as glasses or a wristband, these gadgets monitor a worker’s body vitals for any signs of fatigue or illness that could potentially lead to an injury. Such devices can also warn a worker of an impending danger.
Yet, as the Liberty Mutual report points out, no study has definitively documented whether wearable tech devices actually promote a safer workplace — or reduce worker’s comp liabilities. Their efficacy is unproven, which means manufacturers may rely on technology that, in fact, doesn’t deliver on its main functionality. Furthermore, sensors attached to a worker’s body could disable a nearby machine’s capability to shut down in the event of emergency, thereby nullifying the wearable tech’s safety features.
For manufacturers, Internet of Things (IoT) devices like wearable tech represent game-changing technology that reduce costs and shorten the supply chain. For commercial insurers, those same devices drive an entirely new underwriting approach. As the world increasingly connects through the Internet and the cloud, companies and individuals become more vulnerable to disruptive cyber attacks. So if a 3D printer or a wearable tech device linked to the web fails to perform, manufacturers may need cyber risk insurance in addition to liability coverage, as Marsh noted in its “The US Casualty Market in 2017: Our Top 10 List” report.
For commercial insurers and agents, the IoT demands an entirely fresh way of assessing risk and covering those liabilities in innovative, customized policies. Standard coverage templates expired long ago, and agents must review all probable liabilities for their commercial clients, taking into account new technologies that simultaneously streamline operations and increase risks.
On the flip side, insurers can employ these technologies to their benefit. The IoT gathers massive amounts of data that enable underwriters to accurately evaluate risks. Recently, the head of the National Association of Insurance Commissioners, Ted Nickel, urged the industry to use technology to unleash the potential power in big data.
Agents, too, can use big data and the IoT things to reach prospects, particularly tech savvy millennials. Refine your lead pipeline by pinpointing your target audience through data analytics. Then, customize your message and send it to your prospects on their mobile device — or wearable tech gear.