Despite the general decline in UK manufacturing over the past couple of decades, plastics manufacturing is still a relatively large industry. The number of insurance policies written means the risks are well known and understood by brokers and insurers.
The first step towards insurance best practice is to appoint a broker who understands your business. The role of your insurance broker is to make a thorough assessment of your activities and then using their knowledge and experience, present your risks to insurers. Their aim should be to secure for you the most appropriate cover at a competitive price.
In many respects providing insurance for a company operating in the plastics industry is similar to covering any other manufacturer. However, due to a couple of extra risks insurers may be keen to carry out their own survey.
Business Support Network member Willis Commercial Network works with many insurer partners one of which, Zurich, gives us the inside track on what insurers are looking for if they do survey your business:
Given the known issues of fire associated with plastics (i.e. that they burn readily, can result in running fires due to the ability to melt, that fires can be intense and give off highly toxic or corrosive fumes) insurers will be keen to have as good an understanding of the risk as possible at the outset. For this reason insurers will often wish to assess the business themselves. This is normally done by having one of their own insurance surveyors visit the business premises. Where possible this will be done prior to compiling the insurance quotation.
The survey will cover a number of areas depending on the scope of insurance cover but will typically assess the following areas
• Premises: location, construction, exposure from surrounding premises.
• Occupation: how the premises are occupied, the trade hazards present and associated controls.
• Protections: availability of fire brigade and other fire fighting resources, sprinkler and any other fire protection systems.
• Extended Perils: storm, flood, impact and accidental damage as well as any other perils extensions that apply.
• Security: physical protections, intruder alarm protection and other security measures in place to reduce risk of break-in and theft.
• Business Interruption: assessment of the likely interruption to the business in the event that a material damage loss is sustained.
• Liability Risks: this may include a review of Health and Safety arrangements.
Whilst the survey is typically commissioned by the insurance company it has many benefits for the business seeking insurance. They are assured that the insurance company really does understand the risk and has therefore properly assessed it in the setting of insurance terms and premium. In addition the client can benefit from the sharing of knowledge which takes place on site, given the surveyor will typically have visited many other plastic manufacturing risks and can share their experience in this respect. This will often be done via the provision of risk improvements or risk information documents to help the insured further enhance their existing arrangements.
Different insurers have different views of not only the plastics industry but also the different sectors within it. Some insurers may be keen to provide cover for Extrusion Moulders whilst others might not. This is known as “underwriting appetite”. Insurers with a keen appetite for your sector are likely to provide a competitive quote; conversely, those with little or no appetite may decide to decline to quote for your business. Be sure your insurance broker has wide access to the market, not just global insurers but also niche players and Lloyd’s syndicates.
A key factor for insurers when deciding whether to quote on your business (and on what terms) is the existence of good Health and Safety practices and procedures. Accident rates in the industry have fallen considerably since the turn of the century largely due to the implementation of good health and safety practices. However, due to the existence of machinery and the perceived higher risk of fire, plastics risks will often attract a greater level of scrutiny. This means that companies who have yet to undertake a risk management review may be less attractive to insurers.
One factor, out of your control, that will affect your quote is the insurance cycle. This is similar to the general economic cycle in nature, but historically is the opposite in terms of timing. The cost of insurance cover reduces until the losses become unsustainable for insurers, at which point prices start to rise. Once premiums reach a certain level, the insurance sector becomes very attractive to new insurers. The competition created by these new entrants drives premiums down again. When prices are low, it is known as a “soft” market, and when prices are rising it is termed a “hard” market. External factors that may cause the market to harden are catastrophic events such as floods leading to an increased number of claims or low interest rates leading to a reduction in investment income for insurers. An experienced and professional insurance broker will be able to advise you on the best course of action at any one time.
You have worked with your broker to get the most appropriate cover at the best price taking into account the current market conditions. What do you do when the worst happens and you need to make a claim?
If you are working with a professional insurance broker, they can help you make the claim! Taking out cover with a long established, reputable insurer should ensure they are still operational and able to pay your claim. Your broker will be able to advise you on the stability and market security of an insurer.
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Members of the Willis Commercial Network are authorised and regulated by the Financial Services Authority.