What insurance do manufacturers need?

Australia is in the midst of an industrial boom as the manufacturing sector experiences a much needed revitalisation, see the Manufacturing in Australia Performance Benchmark Report for 2024.

As a result, more of these industrial areas dot our cities and populate their outskirts. But factories and industrial areas come with a set of specific risks. As technology becomes increasingly integrated into these buildings, how they are insured becomes even more important.

“Most factories are not sophisticated, they are basically just a big shed with some office space and maybe a display area,” says Michael White, Steadfast Broker Technical Manager.

Old factories often come with asbestos risks

Nevertheless, with old factory buildings, risks like asbestos roofs and other asbestos products have to be taken into account with insurance. Asbestos roofing is very fragile and is past its use by date.

“They decline to insure the building because of the asbestos roof or put on a very high excess, say $250,000,” says White.

Asbestos aside, while the ‘shed’ may be relatively simple to insure, aspects of insuring the machinery in the factory building need careful consideration to ensure the policy adequately covers the building’s contents. A factory electrical check, or electrical safety audit, is a professional inspection and testing of electrical systems and equipment in a factory to ensure compliance with safety standards, prevent equipment failure, and identify risks. Performed by licensed electricians, it involves visual inspections, RCD testing, and detailed reports, with testing frequency depending on the equipment and operating environment

Often, the plant in the building will have very specialised components that come from overseas. If they are damaged in a fire, for instance, it may take months or even years for the machinery to be ordered, manufactured by specialists offshore and commissioned on site in Australia.

Additionally, choosing the right specialist to manufacture the new component and how to get the factory up and running more broadly may be a complex process, requiring careful consideration and decision-making.

“With factories, it’s important to take sufficient account of the difficulties with replacing machinery,” says White.

There are related business interruption issues, as the more downtime the plant suffers, the longer it is unable to meet orders. This needs to be taken into consideration when planning factories’ insurance programs.

First some housekeeping

Factories need specific risk mitigation processes. For instance, they are often dusty, and the way stock is stored can be a fire risk. So, a proper cleaning regimen is necessary.

“Look at where materials are stored, ensuring there are adequate gaps between stock and the walls and ceiling. Make sure the sprinkler systems are in working order by doing regular checks and ensure the water pressure is satisfactory so that in the event of a fire, they provide some protection, ” says White.

If the factory is in a flood zone, consider how stock and electric equipment need to be protected in the event of a storm or other weather event.

“Public Liability can be another tricky area with factory insurance. If the business employs the workers through a labour-hire firm, that can create significant insurance issues,” he adds.

With many factories connected to the internet too, cyber insurance is a must.

While factories may look simple, there are many complexities to work through.

Talk to a Qualified Practicing Insurance Broker today to make sure you’re properly covered. Contact us here.

Article courtesy of the Steadfast Group.