3D Printing - Implications for Property Underwriters
I have to admit that I haven’t always been an early adaptor of technological advances but now, a few years and four children later, I find myself fully involved in this brave new world. I order my Christmas gifts online, take photos of my checks to deposit them and use an app to have my lunch waiting for me at my favorite luncheon spot.
What does keeping up with technological advances have to do with 3D printing? Well, if you believe the predictions for those advances, by 2025 the economic impact from 3D printing will be between $230 and $550 billion per year. While the first device for 3D printing was created some 30 years ago, we are now seeing rapid developments in the technology as new manufacturers enter the market. As the cost and availability of 3D printers continue to dramatically decrease, it might not be too long before we all have a 3D printer at home.
My colleague Charlie Kingdollar wrote a great primer on potential third-party liability arising from 3D printing so I’ll focus on the implications for property underwriters. The most common use of 3D printing right now is for small volume, prototype parts. Because the parts are built in layers, they can be much more complex than a traditionally built part. Boeing is already “printing” 200 different parts for aircraft platforms. Audi just built a 1:2 scale version of a Grand Prix race car from 1936 by using metal 3D printing to create the components.
NASA manufactured the first 3D-printed object in space, and you can see how useful it would be for space travel. With only a 3D printer and plastic or metal powder in space, you could begin building any needed object (limited in size for now). NASA has also finished testing a 3D-printed rocket engine injector made in 2013. This rocket engine injector, which would have taken over a year with traditional methods, was completed in only four months, with a 70% reduction in cost.
The advantages of 3D printing are obvious. It reduces the time from design to production, as well as waste and transportation costs. As improvements in speed and performance continue, and costs decrease, the use and adaption of 3D printers will likely grow exponentially.
Presently, the cost of materials used in 3D printing are still about 50 to 100 times greater than comparable materials in industrial production. Over time these costs are expected to decrease and become more comparable to costs for materials used in traditional production. For now, however, the energy consumption for 3D printers is much higher than the traditional production of products, which further increases the price.
Every time you use plastic resins and heat, you have the potential for a fire loss. While there is limited loss data, underwriters can look to injection molding machines as a proxy to determine the risk posed by 3D printers. Both combine heat and resins in an enclosed machine. Machines should be equipped with automatic power shut-offs and fire suppression systems. All manufacturers of 3D printers use a different formula for their raw materials. Will the protection be adequate for the flammability of the specific plastic components? Are the machines prototypes? How long would it take to replace them? Storage of raw material is always an important consideration for plastic workers. Is the storage adequately protected? How much raw material will be stored? Dust accumulation and housekeeping should also be taken into consideration.
One would think that metal 3D printing is safer than traditional manufacturing. However, in 2013 Powderpart Inc., a Massachusetts 3D metal printing company, experienced an explosion and fire. The fact that the materials used for 3D printing were in powder form made it easier for a metal fire to start.
Questions to ask:
- Does the company have approved electrical equipment?
- Are the electrical equipment and wiring suitable for a hazardous location?
- Are employees trained on chemical hazards and safeguards?
- Is there a danger tag system in place in potentially explosive areas?
Potential Impact on Property and Business Interruption Exposure
Since 3D printers will reduce the amount of time needed for setup and mold creation, and assuming the quality is the same across 3D printers, it should mean that the BI exposure for manufacturers will decrease. A fire loss at one facility might not have a big impact if you can simply send the design over to the next 3D printing facility and begin production the next day.
A word of caution: The 3D printing industry is in its infancy, so BI is likely to be very volatile regardless of whether an insured makes printers, or uses them. A company could be operating at a loss one year, and receive a large contract the next, which would dramatically change the BI exposure during the policy term.
While I don’t see myself 3D printing Legos for my kids at home in the next couple of years, the technology is here to stay. The impact on consumer products and the economy will be significant. At Gen Re we are always looking at emerging trends and new technologies. As Property Facultative underwriters, we provide protection for the new and unusual risks and regularly consult with our clients on reinsuring these risks.