Since the First Industrial Revolution, beginning in 1760, we’ve experienced Steam, Science, and Digital Revolutions. Sophisticated technology now pushes us into the Fourth Industrial Revolution, powering innovation and productivity in ways we’ve never imagined. Where we used to see human-powered manufacturing floors, we now rely on a tech-savvy workforce to operate intelligent robots.
Whether it’s artificial intelligence, real-time sensors, or 5G speeds supporting uninterrupted connectivity, manufacturing companies are progressing rapidly. As in the first three revolutions, we’re writing a new industry chapter that presents both opportunity and risk for those in the space.
The manufacturing industry has adopted advanced digital practices and incorporated automated alternatives into business operations. Over the past few years, manufacturers had greater digital maturity, showing resilience against bottlenecks — but the labor wars continue to be a challenge.
The tight labor market and workforce churn while talent models are shifting remains to be a headache for manufacturers in 2023. The prevailing workforce shortage due to voluntary resignations that outnumber layoffs and discharges present obstacles in the way of operational efficiency and business continuity.
However, the most significant obstacle in manufacturing might be supply chain issues. With increased usage of digital alternatives, and time-tested approaches (such as enhancing local capacity and quitting just-in-time sourcing) manufacturers are looking forward to mitigating supply chain risks.
Additionally, businesses must continue progressing toward smart factory transformations. Manufacturers should know that tech savvy initiatives drive future competitiveness. Currently, investments made on the basis of technology for smart factories are trending. Many manufacturers are already trying out modern solutions, and actively developing metaverse platforms for their services and products.
Modern consumers are willing to pay more for sustainable items, bumping environmental, social, and governance (ESG) issues to the forefront. Many manufacturing companies actively share operational changes throughout their supply chains to contribute for a more sustainable future with their customers.
Why is Insurance for Manufacturing Companies Important?
Digital “Muscle” Building
Many manufacturing companies have experienced digital success in leaps and bounds. Naturally, streamlining this progress is a no-brainer, especially when it comes to increasing flexibility in supply chain management. However, labor and trade unpredictability is creating a slow-down in momentum.
As a result, many companies are shifting their focus to managing risk better by building agility and scalability with their new digital muscles. With so much depending on digital innovation and advances, cybersecurity remains a top priority for today’s manfacturers. Few organizations can handle a $4M setback, which is the average amount of a data breach nowadays.
Corporate Social Responsibility
Renewable energy sources are a hot topic in the modern world. According to Deloitte, over 25% of manufacturers are known as “Social Supers” — manufacturing companies with a genuine commitment to improving the world.
As imagined, the dedication to green energy wins these companies some clout in today’s society. And this is no longer an elite group. Over 64% of manufacturing companies planned to use more renewable energy over the next five years.
Mergers and Acquisitions
Mergers and acquisitions (M&A) activity is steadily rising, up from previous years. It’s safe to say that manufacturing companies are getting their houses in order to strengthen their core portfolios. With so much pressure to increase capabilities from shareholders, customers, and the global financial market, who can blame them?
That said, mergers and acquisitions have nearly returned to the enthusiastic pre-pandemic state — and so has the deal value. Additionally, partnerships and joint ventures are becoming more commonplace, too. With so much in transition at stake, manufacturing companies are left exposed to multiple vulnerabilities.
Supply Chain Ecosystem
Manufacturing companies diligently attempt to streamline production, but progress doesn’t happen in a vacuum. All the M&As reflect this particular concept. Nevertheless, a vital part of any manufacturing company’s success is its supply chain. Fostering a healthy supply chain ecosystem in such a wishy-washy trade market has proven tough.
Manufacturing companies often target their business goals and look for expansion opportunities in their supply chain. This strategy calls for an “all hands on deck” approach, which means diversifying a supply chain for momentum. Those who opted for this route grew up to five times more than companies who didn’t. However, safeguarding these partnerships concerns many manufacturers.
Manufacturing Insurance Coverage & Policies
Since we’re in the Fourth Industrial Revolution, manufacturers rely on digital technology more than ever before. What this means is these companies face new vulnerabilities never before experienced. For companies striving to keep up with the rapid pace of progression in today’s world, only a robust risk management plan can match the demands of a tech-hungry society.
Core Manufacturing Coverage
These coverages form the foundation of any risk management program with manufacturers insurance at its core:
General liability insurance is a foundational coverage for manufacturers, protecting them from common risks like bodily injury or property damage claims arising from their operations. This insurance is pivotal in covering legal fees and potential settlements, ensuring manufacturers can operate without undue concern over these types of unpredictable liabilities.
Workers’ compensation insurance is indispensable for manufacturers, providing coverage for medical expenses, lost wages, and rehabilitation costs if an employee is injured or becomes ill on the job. By safeguarding employees’ wellbeing, it fosters a safer work environment, helps retain valuable staff, and complies with legal requirements.
Errors and omissions (E&O) is also known as professional liability. This liability coverage is essential for manufacturers, as it provides protection against claims of negligence or harm resulting from professional advice or services. In an industry where advice on product use or service recommendations are common, this coverage safeguards manufacturers from potentially expensive lawsuits, allowing for peace of mind and financial security.
Employment practices liability (EPL) insurance provides crucial protection for manufacturers against claims related to employment practices. This includes allegations of wrongful termination, discrimination, or harassment. As such, EPL insurance aids manufacturers in managing legal costs and potential damages, supporting a stable and respectful working environment for their employees.
Manufacturers face the fundamental risks of operating a business, such as financial, reputational, and compliance risks. So staying in the game for the long run requires strategy. Aside from the basics, however, manufacturing companies also face unique challenges regarding their specialization.
Property insurance is a necessity for manufacturers, offering protection for their physical assets such as buildings, machinery, and inventory. In the event of unforeseen incidents like fires, storms, or theft, this coverage can help finance repairs or replacements, thus ensuring continuity and stability of the manufacturing operations.
Directors and officers (D&O) Insurance is vital for manufacturers, as it covers the personal liabilities of directors and officers when they’re sued for managerial decisions. This coverage safeguards the company’s leadership from personal financial loss, and aids in attracting and retaining high-quality executives, thereby strengthening the organization’s management team.
Cyber liability insurance is crucial for manufacturers in an increasingly digital world. It provides coverage for losses stemming from cyberattacks or data breaches, including costs related to data restoration, notification, and potential lawsuits. It thereby shields manufacturers from substantial financial and reputational damage associated with cyber threats
The cost of insurance for manufacturers can vary significantly depending on several factors, making it difficult to provide a standard price without a detailed understanding of the business. However, it’s crucial for manufacturers to have an idea of what influences their premiums.
The nature of the products being manufactured is one key factor; businesses producing high-risk items, like chemicals or heavy machinery, typically face higher premiums compared to those producing lower-risk items like textiles. The size of the manufacturing operation also matters, as larger operations generally have more assets at risk, which can drive up costs.
Other factors impacting premiums include the business location, as some regions may have higher risks of natural disasters or theft, and the company’s loss history, with companies having a higher number of previous claims usually paying more for coverage. The safety measures and quality controls implemented at the manufacturing site also significantly impact insurance costs.
Companies with robust risk management protocols typically benefit from lower premiums. While these factors might increase the complexity of estimating insurance costs, they emphasize the importance of tailoring insurance coverage to the specific risks and requirements of each manufacturing business.
Types of Manufacturing Businesses That Need Insurance
Navigating a commercial insurance claim is often challenging, often fraught with confusion and multiple unknown factors. The following four-part series outlines the ins and outs of what to know regarding commercial insurance claims:
A supplier was touring a furniture manufacturing facility when they tripped over some loose cables and sustained a broken wrist. The supplier filed a claim for their medical costs and lost wages. The manufacturer’s general liability insurance policy covered these costs, helping protect the manufacturer from significant financial implications.
Product Liability Claim Example
A toy manufacturing company produced a batch of toy cars with small, detachable parts. A child accidentally swallowed a piece and required surgery. The parents sued the toy company for the dangerous design. The company’s product liability insurance covered the legal defense fees, the medical expenses, and the settlement.
Cyber Liability Claim Example
A clothing manufacturer fell victim to a phishing scam, leading to a major data breach. Personal data from thousands of clients was leaked online, causing financial and reputational harm. The clients sued the manufacturer for the privacy violation. The manufacturer’s cyber liability insurance covered the legal costs, notification expenses, and credit monitoring services for the affected clients.
Manufacturing Frequently Asked Questions
The cost of insurance for manufacturing companies will depend on several things, including the company’s size and development stage. Other factors include:
Exposures: risks being insured
Company practices: views on safety, compliance, and risk management
Program structure: the amount of deductible and willingness for a company to assume more risk
Claims history: the type and amount of past claims against the company
Manufacturing insurance isn’t universally mandated by law. However, certain aspects, like workers’ compensation, may be legally required depending on the jurisdiction. Additionally, some business partners or lenders might require you to have specific coverages.
The amount of manufacturing insurance needed varies based on your company’s size, type of products manufactured, equipment used, and potential liabilities. It’s crucial to assess all risks associated with your operations and consult with an insurance expert to determine appropriate coverage.
Start by researching insurance providers that specialize in manufacturing or industrial sectors. Provide them with details about your business, and consider working with an insurance broker who can help navigate the options and find the best fit for your needs.
Business liability insurance protects a company if it’s held legally responsible for damages caused to a third party, which can include bodily injury, property damage, or personal and advertising injuries.
Yes, you can typically customize your manufacturing insurance policy. Providers often offer tailored solutions to address the unique risks and requirements of individual manufacturing businesses.
Manufacturing Insurance Insights
ARTICLES
Workers’ Comp: Are You Overpaying for Coverage?
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Meet your specialist
Jonathan spent the first five years of his professional insurance career working as a generalist broker at a traditional firm on Long Island. Intrigued by how to leverage technology in the industry, he joined the Founder Shield team in 2016 and quickly grew into his current leadership role of General Manager. Jonathan works to oversee client strategy and communication, and has fostered a culture of providing unparalleled service and risk consulting for some of the fastest growing companies in the world. Outside of work, he can be found on the basketball court and chess board — but not at the same time.
Founder Shield is a leading insurance provider that specializes in offering comprehensive coverage for manufacturing companies, offering numerous benefits and advantages over traditional insurance providers. Here’s a breakdown of some of the key features and benefits that you’ll enjoy with us:
Benefits of Choosing Founder Shield:
Industry Expertise
Founder Shield is focused on protecting rapidly evolving manufacturing startups. We ensure that our products are tailored to meet the unique needs of manufacturing businesses.
Customized Solutions
Founder Shield offers bespoke insurance policies that are designed specifically for each client’s needs, ensuring comprehensive coverage that addresses the unique risks associated with manufacturing operations.
Fast Quotes
With Founder Shield’s streamlined quoting process, you can receive a personalized quote for your manufacturing insurance quickly, allowing you to make informed decisions fast.
Ease of Use
Founder Shield’s user-friendly digital platform makes it easy to manage your insurance policies, submit claims, and access important documents whenever you need them.
Dedicated Support
Founder Shield provides exceptional customer service, with dedicated account managers who are always available to assist you with any questions or concerns you may have about your insurance coverage.
Scalable Coverage
As your manufacturing business grows, Founder Shield’s insurance policies can grow with you, ensuring you always have the right level of coverage for your changing needs.
Founder Shield is a preferred choice for manufacturing businesses because of our specialization in the industry. We offer flexible and customized insurance policies, speedy quoting process, and exceptional customer service with dedicated account managers.
Great service – proactive, responsive, go beyond what I have expected from previous providers. The team do a wonderful job
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