At a glance
- Mechanical failure can have a huge impact on a customer’s business
- Both Zurich and brokers can provide expert assistance when it comes to breakdown cover
- Brokers’ customers need to be aware that risk-management and specialist engineering cover is essential
All sectors of business, from the service industry and retail, to manufacturing and distribution, depend on key pieces of machinery to run their operations. If these essential pieces of plant fail, then problems can quickly arise for the company.
Are brokers’ customers aware that the breakdown of a key item of machinery could place their firm in serious financial (and possibly reputational) jeopardy?
Most engineering placements will include inspections as part of ensuring the safety of plant and machinery. However, it may not necessarily cover damage to, or breakdown of, that plant and machinery.
Brokers’ ever present and continued support will always play a key role in mitigating any customer risk, and this is no different when it comes to machinery breakdown. In more depth, those customers being advised to ensure they have sufficient levels of cover as well as being encouraged to consider beyond the compulsory inspection (especially if they have a bespoke or specialist machinery) put themselves in a far more robust operating model should failure occur.
While some forms of engineering or property cover may protect building services, specialist insurance will probably be needed for specific industry machinery, such as overhead cranes or production machinery.
Should the worst happen and these crucial systems fail, customers could find themselves out of pocket when dealing with the repairs and business interruption consequences of the breakdown. With brokers’ in-depth knowledge of their customers’ business, combined with the support of Zurich expertise, customers will be in the best possible position to prevent such crucial system failures.
Taking first steps
To best identify gaps in your customer’s cover, a production risk assessment is needed to identify, control and, where possible, eliminate potential production and supply hazards. A strong maintenance plan can also help to prevent failures and identify contingency measures to keep the company on track should the worst happen.
Brokers will be aware that the starting point for everyone should be an open-minded assessment of all aspects of production, in order to identify where risk exists – particularly for breakdown, and what can be done to minimise the exposure to each risk.
How can Zurich help?
With a wealth of expertise and experience, Zurich Engineering offers a wide range of engineering covers to suit the needs of all manufacturing, distribution and construction businesses.
Zurich’s engineering insurance will also include inspections as part of ensuring the safety of plant and machinery.
And for brokers, Zurich’s combined offering aims to simplify an often complex process, providing engineering insurance and inspections under one policy.
Andy Penny, Engineering Line Business Manager at Zurich, cites the case of a food manufacturer to highlight the complex issues breakdown can cause.
“A food manufacturer with eight production lines and two packing lines could have multiple areas where breakdown can occur,” he explains.
“At first glance, you would assume that there would be some contingency in place should a key item fail – assuming it isn’t working 24/7 – but we need to consider the whole of the process to get a true appreciation of exposure. There will often be unexpected additional costs, such as the need for employee overtime, outsourcing work to other companies or temporary equipment replacement.”
Andy adds: “Brokers can help make their customers aware of these risks and help consider how best to manage them, allowing them to quickly get back on their feet after a breakdown.”
Not surprisingly, power is a key issue to consider and failure can come from a multitude of sources – that can have a variety of impacts.
“Is the machinery reliant on a single transformer?” asks Andy. “Because if it is, then the manufacturer is very likely to find a long-lead time and increased costs while they are trying to get a replacement. They must ask themselves if they are prepared for that and if there is a contingency plan in place.”
Catastrophic failure risk
Businesses should also have contingency plans in place to deal with a catastrophic failure, which occurs when a machine has a complete mechanical breakdown, causing a major incident, such as a fire or explosion.
Such a catastrophic failure can cause damage not just to the specific component in question, but also collateral damage, as catastrophic failure in one area may affect other machinery or processes at the factory.
“If you had a pressure explosion, such as a boiler or steam vessel exploding, then that could damage other production machinery, bottling lines and even raw materials. Would they be covered?“ asks Andy.
“Similarly, your frozen or chilled products may rely on a single cold store, either as raw materials or as finished products awaiting dispatch. If your chiller units fail, it can lead to both a loss of product and the increased costs of hiring replacement units and any delays to dispatch.”
The essential message from Zurich is that every business, factory and plant is different, and it is vital to address individual risks and how they interact on the premises.
“No two risks are ever the same,” says John Hartigan, Engineering Major Customer Manager at Zurich.
“Understanding and monitoring every individual risk is the key to preventing business shutdown. Even a manufacturer that looks to have little exposure probably does have critical items somewhere in the process that are exposed to significant risks. The challenge is to find them and address them.
“Further to this, having the relevant plant and machinery insurance cover in place can mitigate the effects of a breakdown, and provide the necessary support for manufacturers to get back up and running swiftly after any incident.”
Vital to achieving this is not only appropriate insurance, but also implementing a robust risk management process/review.
No two risks are ever the same. Understanding and monitoring every individual risk is the key to preventing business shutdown.”
John Hartigan, Major Customer Manager at Zurich Commercial
“It’s far better to prevent incidents than have to deal with them afterwards, but you can only do this if your maintenance plan has been created with an informed eye on your risks” says John.
Both insurers and brokers can be vital in this process by offering risk-management solutions.
“At Zurich, we have access to market-leading technical expertise and highly experienced staff in engineering,” says John. “We are dedicated to understanding a customer’s business from top to bottom.
Brokers can minimise the risks for their customers by providing expert advice and highlighting any gaps in their cover – giving the potential for cross-selling additional lines of cover.
For more information please speak with your local Zurich contact.