Brokers: Do your customers overlook key equipment exposures?
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Technology moves at a relentlessly fast pace and is influencing the way businesses service their customers. Artificial intelligence, robotics and the Internet of Things are delivering huge efficiencies, yet in doing so have placed a greater reliance on integral machinery and equipment which is more complex and specialised than ever.
High-tech equipment can be more prone and susceptible to damage. Furthermore, it can also be difficult to repair quickly, often requiring specialists to fix, along with a longer lead time and potentially considerable costs to do so. As a consequence, the value of equipment continues to rise right alongside the cost of repairing it.
Given that risk exposures have changed significantly in recent years, is it time for insurance buying habits to change, too?
A growing need for equipment breakdown insurance?
Without adequate insurance cover in place, businesses could be walking a financial tightrope in the event of their essential equipment failing.
Equipment breakdown insurance is often misunderstood and overlooked. Brokers can play a crucial role in supporting their clients by addressing the misconceptions surrounding this insurance, as its absence can potentially leave businesses exposed to operational disruption and unexpected costs.
Equipment breakdown insurance covers the sudden and unexpected breakdown of machinery and electrical equipment. This can include anything from boilers, refrigeration equipment, lifts, and air conditioning units, to high-tech electronic systems, robotics and Computer Numerically Controlled (CNC) machinery. The coverage typically includes the cost of repairing or replacing the damaged equipment, as well as any associated business interruption losses.
So, what are the misconceptions and how can businesses determine whether they are protected from uncertainties?
“Is equipment breakdown insurance really worth it?”
“Modern equipment doesn’t fail.”
As machinery has evolved, so too have the risks, meaning that trusting new, high-tech equipment not to fail is a risky gamble. Modern technology is susceptible to power surges, operator error, and other unforeseen equipment hazards. Discounting this commercial reality could lead to unexpected and costly downtime, disrupting business operations.
“It’s only for manufacturers.”
Historically, equipment breakdown coverage has been regarded as only necessary for large manufacturers but that is far from the truth, and this belief could expose some businesses to risk. Equipment breakdown insurance isn't just limited to production and processing equipment. Any business relying on machinery and technology, from warehousing and logistics to hospitality and leisure, can benefit from this insurance.
“Standard commercial property policies provide cover for equipment breakdown.”
The cost of doing nothing
Equipment breakdown insurance was born out of necessity during the industrial revolution in the 1800s to offer protection for cutting-edge steam technology, such as boilers and pressure vessels, which were susceptible to explosions. As technology continues to develop at an exponential pace, arguably this coverage is even more relevant in the modern era.
However, some businesses are still taking out equipment breakdown insurance just for items requiring statutory inspections, as they always have done. If a forklift truck or passenger lift breaks down, whilst inconvenient, it’s unlikely to grind a business to a halt. In contrast, downtime caused by a high-tech electrical system failure could adversely affect a business’s bottom line and compromise relationships with its customers.