3D Printing Demands Changed Thinking for Insurance Underwriters

3D Printing Demands Changed Thinking

This transformational technology challenges underwriters to come up with cover that provides full protection for manufacturers. 3D printing, also called “additive manufacturing”, has been hailed by some as the “third industrial revolution”. The US president, Barack Obama, went so far as to say the technology has “the potential to revolutionize the way we make almost everything”. Whether such hype is warranted is not yet clear, but the technology is certainly revolutionary.

It is clear 3D printing, which involves the transformation of digital 3D models into solid objects by building them up in thin layers, has recently evolved remarkably quickly. Developed in the 1980s, 3D printing was initially used primarily to produce product prototypes. However, recent advances have allowed manufacturers to “print” final, fully customized products from a wide range of materials.

It now seems almost inevitable the use of 3D printing will increase exponentially.

Insurers’ understanding of this technology and how it will have an impact on their own products, must increase in tandem. 3D printing introduces a spectrum of uncertainties, particularly in the areas of product liability, professional indemnity, and intellectual property. Clients need products that cover the gaps.

3D revolution

3D printing offers considerable advantages for manufacturers and consumers. Unlike more formative or subtractive methods of manufacturing involving forging, casting or machining, 3D printing permits freedom of location. Computer-aided design and the ability to print on demand allow customized parts to be made to order on site from a variety of materials, which reduces waste, input materials and warehouse and transport costs.

It is therefore unsurprising demand for 3D printers is increasing. In 2015, 290,558 3D printers were sold, according to Wohlers. Canalys predicts the worldwide market for 3D printers and associated materials and services will reach $4.9bn by the end of 2016, but will more than quadruple to $22.4bn by 2020. In May Hew­lett Packard announced plans to add its own 3D printer range to this growing market, to compete against those manufactured by Stratasys, 3D Systems and others.

The capabilities of these devices vary but it is clear few within the manufacturing sector will be unaffected by this new techno­logy, particularly as further development occurs, the price of the machines themselves falls and the advantages of the technology are realized.

However, as with any new technology, the explosion of 3D printing challenges both manufacturers and liability insurers to identify the inherent risks posed by the technology and to consider the legal arguments that may arise. In so doing, working practices and policies must be adapted to recognize the technology will have an increasingly profound effect upon how things are made.

It is inevitable, for example, that as the cost of 3D printers falls and more people can make products with them, manufacturers will need to pay closer attention to the security of their digital files. Some may need to consider the use of secret proprietary marks which distinguish their products from copies and counterfeits. This could protect them from unwanted litigation and help with disputes over infringement of intellectual property rights.

Further issues are likely to arise from failures by insureds to acquire appropriate regulatory approval for modified products based on an approved design. Insurers will need to adjust their proposal forms. Careful research and analysis will be required to identify whether products contravene such demands.

With further dissemination of 3D printing and experimentation with the technology and materials used, questions are likely to be raised about quality control and the structural integrity of the products made. As manufactured parts become more and more complex, identifying flaws and faults within the product are likely to become more problematic and unique and as-yet-unknown defects associated with this type of manufacturing process may be revealed.

Blurred lines

Perhaps the biggest change created by this new technology comes from blurring the identity of the true designer, creator and owner of a product. Once a digital model or image is distributed to or acquired by a third party with a 3D printer, the product can be replicated or modified at will.

Uncertainty surrounding accountability and the apportionment of liability raises some of the most interesting issues for professional indemnity and product liability insurers. In the event of a product defect involving a 3D-printed item, manufacturers, insurers and lawyers will be assessing whether legal liability lies with the designer of the original product used for the digital design, whether the original design was inherently flawed, whether the digital file had been corrupted in any way, and whether fault lies with the manufacturer of the printer, the materials used or arose by way of human error at any stage in the manufacturing process.

Purchasing an insurance product that fully insures manufacturers against all professional or product liability is vital to avoid gaps in cover. As underwriters, we will have to keep up with the technological and legal developments of this revolutionary new process.