By Chris Schramm
While the full impact of COVID-19 on manufacturing is not yet known, I am among those who believe the pandemic will spur some companies to return operations to the U.S. Brokers seeking to place manufacturing risks need underwriters who understand the business particular to each risk and have both the required risk appetite and the ability to back up policies when claims are made.
Manufacturing risks are everywhere
The nuts and bolts of manufacturing risks include the manufacture of machinery and components used to make products. Machines – made up of various components themselves – are all around us and touch just about every aspect of our lives.
Consider the ball bearing. Just about anything that has a rotating part in it contains some sort of bearing or bushing. Manufacturers produce bearings for a multitude of uses in a range of sizes and materials, including metal and plastic. Bearings are in sensors for cellphones and cars, industrial machinery, roller-skate wheels and blenders in kitchens around the world, to name just a few examples.
Four ways brokers can vet underwriters for manufacturing risks
- Find an experienced underwriting operation that understands the nuances of manufacturing risks and knows what to look for. Evaluate the history of their underwriting capabilities and their company’s financial strength to back the risk in the event of a claim.
- Probe the depth of the underwriters’ knowledge of manufacturer operations. This includes an understanding of the inherent hazards, not only of the products they are producing but also those related to the manufacturing facilities themselves. Underwriters also should demonstrate their knowledge of how the end products are used. There are, after all, different hazards stemming from the manufacture of component parts compared to the manufacture of the end product.
- Review the underwriter’s track record to learn where they shine. At Argo Casualty, for example, we’ve spent years underwriting manufacturing facilities and have developed a wealth of knowledge about the exposures as a result. Our focus is non-construction casualty, with an emphasis on manufacturers that have commercial and industrial end users.
- Assess the underwriter’s ability to expertly handle claims. When a policyholder has a claim, the last thing a broker wants to worry about is whether the insurance company will be able to pay that claim, provide a top-notch defense or accurately discern the nuances of the risk in order to appropriately adjust claims and protect policyholders.
There are a number of factors that will determine when and how many manufacturers will return to the U.S., including labor costs and availability of technical expertise. Smaller machine shops able to produce components are likely to come back first, rather than full-fledged manufacturing operations. Yet manufacturers have already begun to pivot in the face of COVID-19. Some have been able to repurpose their manufacturing operations to produce hand sanitizer, masks and other types of personal protective equipment. There are also new operations starting up to do these things, although not on a large scale. Will this breed a new round of entrepreneurs? That, too, remains to be seen.
With more opportunities to write manufacturing risks, brokers should be sure they are working with underwriters who are able to dive deep into manufacturer operations and provide the products and solutions policyholders need.
Chris Schramm is assistant vice president of underwriting for Argo Casualty.
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