How To Take a Nuanced Approach to Technology Risks
Not all technology risks are the same, and the range of fire hazards within the tech sector’s occupancy groups is as wide as the underwriting considerations. Some manufacturing processes can be quite hazardous, while others are more innocuous.
Differentiating between risks and accurately assessing where insureds fit on the hazard spectrum presents both a challenge and an opportunity to underwriters.
Understanding occupancy is a good place to start. The journey from creating a chip to the mobile phone it resides in involves at least five different occupancies which typically occur at different locations. As the quality of risk information decreases, so does the ability to differentiate risk.
Knowing the raw materials and component parts involved may be a clue to the ensuing manufacturing process, or indicate what is not occurring at a given facility, which can be as helpful.
It’s best to focus on process hazards, rather than what the product does. In other words, find out how the product is made: Are flammable liquids involved? Is it a manual process or is it highly automated?
Linked to that, it’s essential to ascertain whether products are actually being manufactured. Or are they being assembled? There’s a big difference. One tech risk may simply involve attaching various components to blank circuit boards while another may also involve making the blank boards onsite, which means laminating, resins and heat.
Don’t take terminology for granted when there are references to devices. The word device could refer to a chip or a hard drive.
The use of clean rooms at a facility is worth noting. Though not inherently hazardous, a clean room can present a bottleneck exposure if all of the finished product is dependent on it. If covering the building, remember that a large, built-in clean room will greatly increase the building’s replacement cost. Modular clean rooms often cost less and can be replaced more easily.
The economic realities of the insurance business mean that some risks need to be quoted without an inspection report. Checking the insured’s website can be helpful as sections such as “Products and Services” or “What We Do” usually feature pictures of the company’s premises and products. But don’t make too many assumptions because, in the end, websites are marketing tools.
Again, hi-tech occupancies require a nuanced approach from underwriters. Don’t be afraid to ask us if you need a second opinion.