Top insurance tips to the manufacturing industry

The manufacturing and wholesale industries are made up of a huge variety of trades, each with its own specialism and way of working.

Manufacturing is one of our largest industries, and in the UK it has higher than average rates of accidents that lead to injuries. Even the most safety conscious and risk aware warehouses or factories contain hazards, which is why you need a manufacturing insurance policy and a specialist broker to cover you for a range of risks.

As a manufacturer, your insurance requirements can be more complex. That’s why our specialist account handlers can arrange a policy to help meet the needs of your business, to ensure you have the cover you need should the worst occur.

Whether you run a large scale commercial premises or rent a small unit, the risks you are exposed to will be very different. It is therefore essential that you have an insurance policy in place to protect your staff, third party liabilities, premises, stock and materials.

Below are a few examples of what your business should consider when arranging your insurance policy:

Machinery Value

Ensure you have got an adequate sum insured for your machinery and plant. The sum insured should be based on the cost to replace, install and calibrate. It is not uncommon for proposers to often use a depreciation value as their sum insured which in the event of a claim could lead to underinsurance and a considerably reduced settlement.

Get your Business Interruption Insurance right

Most manufacturing businesses will insure on a Gross Profit basis. In accounting the Gross Profit calculation will subtract any cost from the turnover that varies in proportion to production output i.e. if the turnover is reduced by 20% the costs of making the goods, should also decrease by 20%, however this term means something very different for insurance purposes, as those costs must directly vary the output proportion. Wages are not deducted from the Gross Profit sum insured as in the event that you are not able to trade following a major loss you will still have/want to be paying your employees so that they are still your employees when you reopen.

Describe what your business does and make sure it’s noted on the schedule

Always be wary of vague a business description or certain activities not being noted. The typical rule that we always advise our clients is that if it isn’t noted on the schedule then you are not covered. Insurers tend to generalise and with that can come general terms and a general premium which might not necessarily be providing the cover you think it is. Not all businesses are the same, so why should your insurance be. Make sure that your broker and insurer understand exactly what the business activities are, so the right cover is given at the correct premium.

What activities are considered high risk in manufacturing and wholesale?
Underwriters will be interested in what type of product is being made, where materials are sourced from and where you are sending finished goods to. Below are few examples of what insurers will consider to be high risk factors.

• Products sent to the USA/Canada can be of concern due to the size of the compensation settlements awarded by the courts and the perception of it being a more litigious society. As a result, many insurers will automatically exclude USA/Canada.

• Materials or products that are made in Asia are often a concern, as quality standards can be lot lower. Insurers also find it difficult to subrogate a claim against a company based in Asia, which means that your insurer may rate you as the manufacturer if it is perceived that recourse against the supplier will difficult to enforce.

• Safety critical goods or toys carry an increased risk should they fail when being used.

•  Perishable or temperature-controlled goods such as food or medication can easily be lost in transit or be ineffective once sold if not stored correctly.

• It goes without saying that solvents, corrosives and explosives can increase the risk of fire at a site.

• Food supplements that contain various ingredients without any proven medical effect.

• Unattended Processes. Unfortunately, this is often unacceptable to insurers due to the risk of fire. Your policy wording will almost certainly contain an unattended machinery or processes condition. If you do leave machinery to continue whilst the premise is unoccupied check your policy or speak to your broker about restrictive clauses.

Do you carry out design work?

Have you got Professional Indemnity Insurance? With the best will in the world things can go wrong with any job, especially in print. A wrong number or a simple spelling mistake can lead to huge potential costs of reprints or consequential losses.

Alarms – Bells only or Redcare?

Alarms along with other security features can reduce the insurance premium and discounts are available for businesses that have alarms that are services and maintained. If you have advised your insurer that an alarm is used at the property it is important to review the clauses being applied within the wording, as an alarm condition may invalidate your claim if it transpires that the alarm was not properly set or was not at the insurers requested specifications.

Property Construction

Is your premises “Standard Construction” and what does standard mean? Firstly we need to understand the definition of standard construction under Property Insurance, a typical policy definition describes this as a property constructed from – Brick stone or concrete built and roofed with slates tiles metal concrete or sheets or slabs composed entirely of incombustible mineral ingredients and plastic roof lights. The insurance sector is seeing an increase in commercial properties that are being constructed under what is classed as Modern Methods of Construction, these include Composite Panels, which are not uncommon in the food production sector. Composite Panels vary in their fire resistance and it is important for a business owner to accurately confirm what the buildings construction is.

Sell yourself to insurer 

Insurers love good risk management and ultimately it can lead to some considerable discounts on an insurance policy. If you provide regular training, are ISO9001 accredited, have awards or accreditations, tell them!

What insurance cover is available and what do I need to insure?  

Employers Liability Insurance – Required by law

If your employee is injured at work, or becomes ill as a result of the work they do for you, Employers Liability covers the defence costs as well as any compensation that may be needed to be paid to the insured.  Employers’ Liability Insurance is a legal requirement for all employers within the UK. The minimum required limit is £5,000,000 although most insurers give £10,000,000 as standard. The policy is designed to protect employees’ who sustain an injury or illness during their normal business activities by providing compensation.

Your insurance policy should cover all employees including seasonal staff and temporary employees. The Heath and Safety Executive is responsible for enforcing the law of Employers Liability Insurance and you can be fined up to £2,500 each day for not having appropriate insurance in place.

Public Liability Insurance covers you for any bodily injury or property damage which arises in the course of your day today activities, such as visiting a supplier’s premise or when a customer come to your site.

Products Liability Insurance covers the cost of compensating anyone who is injured by a faulty product that your business manufactures or supplies.

If you do not manufacture the product but you distribute it, you should still be covered, as you may need assistance in the following scenarios:

• If the products were faulty when they were supplied to you
• If you did not give customers suitable warnings about misuse and adequate safety instructions.
• If there is no product recourse available and you are effectively treated as the manufacturer
• If you break bulk, repackage or rebrand.

Buildings, Machinery & Contents Insurance – cover your machinery, business equipment and other workplace property such as moulds and computers against fire, flood, theft and more so you can have peace of mind that you’re protected against the unexpected.

Business interruption Insurance. We can help you get back to work after a crisis. If the site has a significant loss, business interruption insurance can help soften the blow whilst your property and machinery is repaired or replaced.

It can cover loss of income during periods when you cannot carry out business as usual due to an unexpected event, and aims to put your business back in the same trading position it was in before the event occurred. Business Interruption Insurance is available on several different bases, these include Loss of Income, Loss of Gross Profit, Increased Costs of Working and Addition Increased Costs of Working. You can also choose the period you wish to receive indemnity for depending on your needs.

Goods In Transit and Marine Cargo Insurance. A manufacturer or wholesaler’s goods or materials are frequently moved around. Goods In Transit covers goods against loss or damage while in your vehicle or when sent by a third party carrier.  Marine Cargo Insurance goes a step further and covers losses arising from damage to goods whilst being transported around the world by road, rail, sea or air. Whether it be materials from suppliers in Asia, to delivering bulk orders to the USA, don’t rely on the carrier to protect your goods.

Engineering Inspection. By law there is a statutory requirement to inspect plant at regular intervals that are open to deterioration over time. The policy covers the cost of an inspection for your plant and machinery, such a mechanical lifting gear, ventilation and compression systems by a qualified insurance company engineers. They visit the location of the plant, inspect and then provide you with an inspection certificate. Cover can also be extended to include insurance for sudden and unforeseen damage to the plant and any surrounding property.

Products Recall Insurance covers the expenses associated with recalling a product from the general market. Product Recall Insurance is typically purchased by mass production manufacturers for items such as children’s toys, electronics, foods and beverages. It covers costs such as customer notification, shipping costs and disposal costs. A badly managed products recall can cause panic and be devastating to your company’s reputation. Call Clarke Williams for further information on the options available.

For more advice on what cover is available for your business call 01732 252 898 or email info@clarkewilliams.co.uk