August 1, 2013 by Tim Woods, Assistant Vice President, Engineering and Risk Management, Aviva Canada
While 3D printing may not be a frequent topic of conversation at your typical summer barbeque, industry experts are predicting it will revolutionize the manufacturing industry the same way the Internet changed the way everyone communicates. A pretty lofty comparison when you think about it. So why? What is 3D printing and how will it affect the insurance industry?
MADE FOR MANUFACTURING
Although it has been around for decades, 3D printing is really starting to hit its stride and becoming commonplace in manufacturing. In the simplest of terms, 3D printing is a process that enables a tangible 3D object to be created by way of digital data and various materials – everything from plastic to rubber to metal.
Unlike the 2D printer that outputs simple ink on paper, 3D printers can place the various substances in layers to construct a three-dimensional solid object. The 3D models are painted from the bottom up, depositing layers of modelling and support material. There is no curing time, as the models emerge hard right out of the printer with minimum to no raw material waste.
Any support material that was required to take the object through the printing process can be removed by washing, dissolving or simply breaking off.
Currently, this technology is used for both prototyping and distributed manufacturing. Products such as toys and jewellery are being created using 3D printers and are entering the marketplace on a regular basis. In Paris’ recent Fashion Week, for example, 3D clothing fashions were on full display.
Recent media reports have focused on the fact that the parts for a gun could be printed. But we should not be worried about a widespread crime uptick as some pretty expensive equipment and significant know-how would be required to produce a plastic gun capable of firing one bullet at very short range.
In the medical field, 3D technology is hailing a new advance in prosthetics. In 2012, an 83-year-old woman suffering with a severe jaw infection received a full 3D printed titanium jaw implant that allowed the patient unrestricted mandible movement within days of the procedure.
Several industries, including auto, industrial design, construction, aerospace, engineering, biotech and food production are also among those benefiting from the use of 3D printing.
This is just the tip of the iceberg; we can only imagine how applications of the technology will develop in the future. Add smart machine technology (machines that self-monitor, diagnose and adjust) that print out worn parts as required, and manufacturers will be able to prevent downtime waiting for new parts. Combine this new agility with other unforeseeable benefits and we could see major changes to supply chain management and the economy in general.
What does this mean for the equipment breakdown insurance (EBI) industry?
NEW BENEFITS, NEW CIRCUMSTANCES
3D printing is set to transform the insurance market as brokers and insurance firms grapple with new concerns around not only equipment breakdown, but also professional indemnity, product recall and product liability risks.
With every new product comes a host of benefits, but also new circumstances that must be adapted to. For EBI professionals, 3D printing can allow for the speedy delivery of replacement parts for the various machines that their insurers cover. It may significantly reduce claim exposures – through a declining scale in manufacturing – as a result of production equipment being removed from large manufacturing hubs.
With all the evident advantages of 3D printing, the technology will continue to improve and transform, thereby requiring a deeper understanding within the insurance industry, and will require frequent updating.
EBI professionals will need to be increasingly diligent in asking thorough questions to new additive manufacturing clients (including at the renewal stage), specifically with regard to the equipment used in product development through 3D printing and what steps they have in place to avoid equipment breakdown losses.
A vigilant and biddable attitude is essential to properly assess and mitigate risk.
EBI professionals are well-aware that electronic equipment and computer exposures will continue to be on the increase for the industry. Insurers must bring their engineering specialists both in underwriting and claims roles up to speed with this technology and its space in all affected sectors.
As with most new products, EBI rating for additive manufacturers will also require attention, as little or no actuarial data exists for this advancing technology.
In addition, EBI insurers will need to guard against potential contingent business interruption losses in this sector. At the very least, it is necessary to assess the extent to which the insured’s operations rely on another entity and the degree of disruption that a long-term computer/printer outage may have in hampering the insured’s ability to maintain normal business operations.
A continuous monitoring of policy wordings will be required as we move through this new era to reflect changing exposures from a direct, resultant, consequential, or business interruption standpoint.
As with any technology change, information is the key to success. Insurers will have to educate themselves, brokers and clients on both the changes in exposures, along with possible changing techniques to manage the risks to business.
Although some EBI insurers may initially pass on this technology, the sector as a whole most likely will embrace the 3D process and applications through sound underwriting, adequate pricing and stringent loss control.
Ultimately, the worldwide EBI insurance sector will play a major role in the unfolding story of 3D technology. Insurance brokers should contact their respective insurers to learn and better understand the question set required to properly and adequately insure the exposures presented by this 3D manufacturing revolution.
With a better understanding, we will all better serve our customers.