Australia is in the midst of a factory boom as the manufacturing sector experiences a much needed revitalisation, with a 4.1per cent rise in output from manufacturing expected in 2024.
As a result, more of these structures dot our cities and populate their outskirts. But factories come with a set of specific risks.As technology becomes increasingly integrated into these buildings, how they are insured becomes even more important.
“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.
Nevertheless, with old factory buildings, risks like asbestos roofs have to be taken into account with insurance. This kind of roofing is very fragile and is past its use by date.
“They decline to ensure 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.
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 andcommissioned 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 of Things', cyber insurance is also a must.
While factories may look simple, there are many complexities to work through.
Talk to your us today to find out more