Why the right equipment breakdown insurance is vital for manufacturers
Why the right equipment breakdown insurance is vital for manufacturers. In this episode of IBTV, Sovereign Insurance Associate Vice President, Equipment Breakdown, Ryan Jones talks evolving manufacturer cover needs, the importance of loss control, and why Canadian businesses risk being left behind on emerging technologies if more help is not given.
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Jen: [00:00:22] Hello, everyone, and welcome to the latest edition of Insurance Business TV. I'm Jen Frost, news editor, Insurance Business. Today we're looking at equipment breakdown cover in the manufacturing sector while Canadian businesses are seeing the benefits of production capability improvements. They're also grappling with some challenges as well. Now I'm joined by sovereign insurance associate vice president of Equipment Breakdown, Ryan Jones, who is going to talk us through some of these challenges as well as cover needs. Ryan, thank you very much for joining us today.
Ryan: [00:00:57] Hello. Good morning. Thank you for having me.
Jen: [00:00:59] Great having you on the show, Ryan. Thank you very much. So what are some of the key risks facing these manufacturers at the moment?
Ryan: [00:01:08] I think the it's important for us to set some foundation here. So Canada's manufacturing sector contributes to approximately 175 billion of our GDP. It's about 10% of Canada's GDP requires about 1.7 million employees to facilitate. 93% of our manufacturing sector is made up of small, medium enterprise businesses. Those businesses that don't have the Foundation for Research Development and for implementing IAC, for implementing artificial intelligence and other challenges that are faced to move forward in the business segment, 25% of their workforce will retire by 2030, and a lot of the larger manufacturers and a lot of the global manufacturers have already shifted to more automated operations. So I think this is where some of the challenges lie for our manufacturing sector in Canada, in the sense that we have to take the next step to digitize and we have to do it in a way that makes it easy for the businesses in Canada.
Jen: [00:02:17] Wow. So it sounds like there's some big challenges for some of these SMEs as they really look to push forward. What kind of coverage do they need to have in place?
Ryan: [00:02:27] That's probably one of the most challenging questions and probably one of the ones that I think is most important for everyone to hear from this conversation. So traditionally there's two types of boiler machinery coverage. There's one that's put on to a policy, as we would call it rider, and it's added to the property policy to fill in gaps that wouldn't other be otherwise be covered by the property policy. And there's one that we would call a model line or standalone equipment breakdown policy, which is entirely, as it sounds, removed from the property policy and has its own definitions and coverages for the manufacturing sector. And the most important part for them to look at is what is there for business interruption, expediting and extra expense. And I talk specifically about expediting in extra expense with our business partners here at Sovereign, because those are the coverages that are going to allow our manufacturers to speed up or mitigate the amount of downtime they have and feel full autonomy and solving the breakdown that they have at the time.
Jen: [00:03:34] You've talked around business interruption there, Ryan. And of course, we've just been through all the disruption that the pandemic entailed as well. With that in mind, how is what clients need from their insurance providers really evolved in recent years?
Ryan: [00:03:47] Yes, unfortunately, with the COVID, the pandemic or the COVID impacts to our industry, make sure that the coverage has evolved very much. But everyone's knowledge of the coverage has evolved. With the delay in spare part delivery, with the delay in available products in general. A lot of clients, when they have losses, are now finding out that the costs associated with their downtime a lot more than it would have previously been looked at. It previously been forecast. So in turn, brokers and representing their clients are looking at how much coverage is there and is there adequate limits to deal with what the pandemic has brought as far as shortages and constraints to the industry?
Jen: [00:04:36] And we're going to talk loss control. Just how does this fit into the piece?
Ryan: [00:04:41] So risk engineering, risk control, loss control, all synonymous terms that the industry uses to describe a group of folks who are who are employed by insurance companies to assist company owners, in this case manufacturers, in identifying exposures that might adversely impact their overall business. At sovereign, we have a slightly different approach to risk risk engineering in the sense that we use our risk engineers to go out there and assist companies in looking at what will we do when the loss occurs rather than looking at just what we're going to do today. We want to help them understand what the loss is going to look like when it does occur, because they do occur. That's why we're in business. And then we help to say this is how we are going to solve that problem. So these are the people that we're going to engage on the claims side to mitigate and where we're going to get the resources and products that you need to bring your company back up into service and back up to speed.
Jen: [00:05:47] And just why is it so vital for manufacturers in particular?
Ryan: [00:05:50] Yes. And I think this goes back to your comment about the pandemic and back to COVID. So with the extended delay times now, I believe it's ever more important that we look at predictive maintenance, and that's where risk engineers really become valuable. Historically, we've looked at preventative maintenance, sometimes even reactive maintenance, depending on the philosophy of the business. But with components being coming very difficult to get our hands on, we have to look at predictive decisions that when we do see something that's about to occur, we can go ahead and purchase that asset or component. And the lead time no longer impacts our overall operation.
Jen: [00:06:30] So very much about looking to identify these issues and proactively find solutions before a problem can happen. Are there any other big trends with challenges that you're keeping an eye on at the moment? Ryan.
Ryan: [00:06:41] Very particular to Canada. I am actually looking at the industrial Internet of Things in an area that I'm very passionate about is artificial intelligence. And I think these are two areas that are manufacturing sector is significantly behind other global sectors and one in which our SME or small and medium enterprise need a significant amount of support from the insurance sector, from governments, and to better understand what the overall impact is going to be to their operations going forward. So I think if anyone was spending some time looking at the manufacturing sector, we've become automated. The next step is with potential shortage in labor to our manufacturing sector, which is crucial to our overall economy. We have to look at how we can leverage AI and IIOT and what that means to everyone as far as impacts to the overall business operations.
Jen: [00:07:39] So looking to build on some of these tech capabilities and these businesses as well want to be able to benefit from new technology. Right. Well, thank you so much for your insights, Ryan. It's been great having you on the show.
Ryan: [00:07:52] Thanks for having me.
Jen: [00:07:54] And thank you also to our viewers. Don't forget to check out more of our videos, podcast and daily news at www.insurancebusinessmag.com/ca. I'm Jen Frost, news editor, Insurance Business.