Insurance For Robotics Businesses

Have you ever read “Do androids dream of electric sheep?” (this was retitled to Blade Runner back in the 80s). Thankfully, we are not androids living in a dystopian science fiction novel, and we still dream of real sheep, but the robotics industry is swiftly reshaping our world. Automated brain surgeries, teaching robots, STEM solutions, and even artificial emotions are all part of today’s robotics business. Scary to think about, and often hard to believe, but the industry is moving quick.

When working with expensive equipment and advanced technology, insuring your products is crucial for keeping up with the competition as well as avoiding any unexpected costs. That’s why we’ll tell you all about the robotics business and how you can make your androids really dream of electric sheep - safe and sound! 

First of all, when ordinary people talk about robotics, we always think about robot butlers walking around, greeting people, or even passing us a bottle of whiskey. This is halfway true because the robotics industry is so much more than that. Robotics is an interdisciplinary branch of science combining both engineering and computer science. It is also a process of designing, operating, constructing, and manufacturing robots that will help and aid humans in their everyday work. 

If you’re asking yourself whether this is a new idea, the answer is that it has been ripening in human minds for thousands of years. Yes, you read that right - thousands of years. The robotics business dates all the way back to the third century B.C. in ancient China when the ‘artificer’ Yan Shi drew an ‘automaton’ for the first time. Since then, many innovations and improvements have been introduced and robots can now even develop emotions or be used in quantum computing. Currently, we’re expecting a rapid increase in the global robotics market from $3.54 billion in 2021 to $4.17 billion in 2022, plenty of sheep for your robots to dream about.

This trend is based on the need of minimizing manufacturing costs, process automation, ecological solutions, reducing workplace injuries, and many other useful robotic applications which you can utilize in your everyday working process. However, in the following years, you can be especially successful by investing in robotic applications in several industries. Some of them include the automotive industry, plastics and rubber, food, beverages, consumer goods, medical solutions, unmanned aviation, and pharmacology.

If you want to invest in robotics, you should keep an eye on the trends, opportunities, threats, and main competitors in the industry. Nonetheless, the Swedes would say “worry gives a small thing a big shadow” - and that’s why we’ve separated the Top 5 Robotics Predictions for 2022 for you:

1. The number of collaborative robots will constantly grow: Your competitors' dream of full automatization of their work processes. That’s why you should consider the ‘robots’ and learn all about other companies' investments and shares in this particular sector.
   
   
2. Interoperability - key factor for success: When designing a robot, you should always keep in mind the interoperability of the product. Today’s companies integrate different platforms provided by multiple developers to guarantee that their robots are communicating with each other. So, remember that your robot must know how to communicate with a robot from a different vendor or operate on a different platform.
   
   
3. Delivery robots on the rise: You will see that the number of delivery robots will significantly increase in 2022, because of the increased demand by food chains and beverage industries.
   
   
4. RaaS (Robotics as a service): This is another trend that you should keep in mind before entering the robotics industry. You must consider these cloud computing services which integrate your embedded devices and robots into a single cloud or WEB environment. Mind that these contracts are concluded as subscriptions, and each company offering them has different terms and fees.
   
   
5. Insurance - one of the future’s main advantages: Providing insurance for your robotic products should be your number one priority after all the manufacturing activities are finished. In the following years, the insurance for robotics business will rapidly develop and introduce new insurance products for you.

We discuss that last point thoroughly in another article because robots are shaking the insurance world. Check it out here.

Nevertheless, the main question which will naturally pop up in your mind is ‘who can be responsible if a robot goes wrong?’

It’s not enough only to graze the sheep, you have to keep them from the wolves too. (If you skipped ahead, we're referencing the Blade Runner remark above). Your insurance will cover the costs of many potential risks inherent to robotic products. 

But first, you must acknowledge that the insurance expenses will directly depend on the type of risk you’re covering. A business manufacturing products is going to have a different looking policy than a business developing software. A rule of thumb when thinking about insuring any operation - always protect your people, your customers, and your property.

Following are the most common risks and insurance policies in robotics:

• General liability insurance
• Product liability insurance
• Commercial property insurance
• Cyber liability & Data Breach
• Workers’ compensation insurance

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ADVISOR TIP: Almost any country or state will oblige you to general liability, product liability, and workers’ compensation insurance. If you want to stand on firm ground, please check which of these insurance policies are compulsory in your state or country.

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If you're looking to scale your business and raise money, most investors will want to see a comprehensive insurance portfolio including Directors & Officers (D&O) and Employment Liability Insurance.

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General Liability Insurance

As you would expect, this is the most common type of robotics insurance policy. This is because the general liability insurance policy is the back-bone to most insurance packages. It's going to defend you from third party injuries un-related to your product (customer or client slips and falls in your office).

In robotics, general liability insurance can cover risks such as:

1. Bodily injury claims: Don’t neglect the fact that somebody must be responsible if any of your colleagues or even you get hurt in the workplace. Beware that this can happen at any time and any place, and you should have covered the expenses you would otherwise have to pay from your wallet.
2. Property damage claims: Your general liability insurance policy should also include the potential damage done to other people's property (like damaging the floor of the office you rent).
3. Advertising injuries: Ensure that all your advertising is carefully planned and doesn’t offend any competitor or state false information. This layer will help defend you if you get an advertising lawsuit.
4. Legal defense costs: Imagine that some of your competitors sue you, and they win the case. Naturally, you'll have to pay large sums of money to your competitors, but the insurance company will get you covered. 

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Product Liability Insurance 

This is what you probably assume it to be - coverage for a claim related to a product you design, manufacture, distribute, or sell. To understand product liability insurance, we must think of patterns and examples. 

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Imagine that you’ve introduced a robot in your factory, and since then, your production volume has constantly been increasing. However, a defect report lands on your desk, and all of a sudden, you might be held legally responsible for all the junk products delivered to your customers.

In this case, the product liability insurance will give you space and time to focus on repairing your robots rather than relocating huge amounts of money for legal compensations.

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Commercial Property Insurance

Imagine that you’ve made huge investments into designing, building, or purchasing your robots. Suddenly, the foul installation bursts into a fire that swallows up your whole factory or some sections of it. The costs for rebuilding and reissuing will be enormous, and that’s why you’ll be better off with commercial property insurance than without one.

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Commercial property pays for things like the building you own, your business property such as equipment, computers, furniture, and more, and rented or non-owned property used for the business.

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Cyber Liability Insurance

The robotics industry is full of hidden risks regarding cyber vulnerability, and you should take into consideration all of them in your cyber liability insurance.

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Following are some of the main robotics cyber threats:

• ‍Cybercriminals (terrorists, spies, hackers, or organized criminals)
• Insider threats
• Incompetence
• Unprofessional developers and operators, competitors, etc. 

The vulnerability of your products is increased because of their automation and their operation on a certain platform. So, before contracting your cyber liability insurance, make sure that you employ the best robotics development and maintenance companies. 

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Workers’ Compensation Insurance 

The workers’ compensation insurance is one of the key insurance policies in the robotics business and also an obligation of almost any manufacturing company. If you're located in California, for example, this coverage is required if you have anyone working at your direction (full-time, part-time, subcontractors).

Imagine that you’ve introduced a robot to automate your process, but out of the blue, one of your workers gets hurt, and you should compensate for their medical costs. This coverage will shield all your employees and even yourself from any work-related injuries or accidents.

As a robotics company, there are different insurance costs for you in contrast to companies operating in other industries. For instance, the average insurance expenses for robotics companies are much lower than those paid in building & maintenance, cars & transportation, or foods & beverages. 

However, you’ll have to pay much more than in industries such as finance & real estate, teaching & coaching, or travel and hospitality.

The costs which you will pay depend on the different insurance policies you must obtain to become eligible to operate your robotics company. Furthermore, the main factors which will determine the pricing of your insurance policy are:

1. The number of employees
2. The per-occurrence limit 
3. Location and offices
4. Insurance deductibles
5. General aggregate limits

The average insurance costs that a robotics company would have to pay range between $350 and $2,000 for a business with 1-2 employees and minimal products. Organizationw tih These costs may vary, as different insurance companies may cover different niches regarding your work process. If your bus

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The Insurance Rate

The insurance price you’re going to pay usually depends on two factors: the insurer's rate multiplied by the exposure.

Insurers will assess the rate according to your loss history, the potential costs and severity of loss, and the environment where your robot operates. Moreover, the exposure can be assessed by defining the frequency of products manufactured, sales, or hours of work over a year.

If it still sounds complicated, then here’s a piece of music for your ears - robotics insurance can significantly reduce the money you pay for other insurance policies. So, naturally, when you calculate the costs, you can reduce them by the amount you won’t be paying when introducing a robot in your work process. 

You can further optimize the insurance costs by providing a robust management program regarding robotics. All companies which have a proactive and dynamic approach and assessment of the robotics-related threats are more likely to contract better pricing than the others. This is so because insurers will take into account every business practice in your company. Beware that both actuaries and insurers will try to persuade you to a higher price, but emerging practices like RPA (Robotic Process Automation) and AI can contribute to overcoming these issues.

These technologies are based on sophisticated algorithms and can easily clarify all complex issues regarding the insurance of your robotics and help you contract more genuine prices. 

The Verdict

As robotics become more and more accepted among the business community and the residential environment, accessing the risks will be much easier. Subsequently, the premium pricing will decrease, and you could contract a much cheaper robotics insurance policy.

The process to get insurance is an easy and straightforward process. You get us the information we need to engage insurance providers and we'll supply the best possible quote(s). We're also real people that probably live in your city, and we value relationships, so meeting in person is always an option. At the end of the day, our job as brokers and advisors is to educate you on what everything means. It also helps us to understand your business and insurance needs, so we can get underwriter comfortable with quoting. We'll help you understand insurance and risk management practices, and be there for you as the business grows.

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Some traditional businesses can move through the process faster as a lot of underwriting is supported by artificial intelligence, but most policies today will be reviewed by an actual person. We have decades of experience working with the underwriters at each insurance company, and pitch your business to each of them. We work with and for you.

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The standard process to produce quotes for your business is as follows:

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1. Advisor Introduction: this can be a quick phone call, email, video conference or in person meeting. You'll decide if you enjoy the advisor and trust their advice. This is also where you'll be able to ask questions, provide information about your operation, and go over the process to get insured.
2. Data Collection & Underwriting: this is where you'll get into the fine details about underwriting questions and information that will be necessary to engage the insurance market. You'll be able to chose from filling out PDF's, going through our smart-form technology, or provide it all over the phone, email, or in person.
3. Quote Proposal & Review: once your advisor has the information needed for underwriting, they will work with the insurance market to produce quotes. This can take a day or up to a week, depending on the time and operation.
4. Finalize Coverage: here you'll decide the coverage to move forward with. Final steps include signed documents, payment, and selecting a specific start date.

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ADIVSOR TIP: Be prepared to spend 5-10 minutes with your advisor to break the ice and get the ball rolling. Once aligned, your advisor will create clear next steps and create a timeline for quotes. If your business is new, and has unique risks, then you should expect a little back and forth.

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Get in touch with your advisor, or send over the details digitally today.