The manufacturing sector presents challenges and opportunities for insurers and brokers: intense price competition on the one hand, but exciting

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1 Insurance for Manufacturers OPPORTUNITIES FOR BROKERS TO ADD VALUE AND DIFFERENTIATE THEIR OFFERINGS TO MANUFACTURERS THIS INFORMATION IS INTENDED FOR INSURANCE BROKERS AND OTHER INSURANCE PROFESSIONALS ONLY

2 2 The manufacturing sector presents challenges and opportunities for insurers and brokers: intense price competition on the one hand, but exciting opportunities on the other, for brokers to add value and differentiate their offerings.

3 Executive Summary In a highly competitive insurance market some manufacturers, especially traditional ones with reasonable claims experience, have been the subject of intense price competition. There is a tendency to see some manufacturers insurances as commodity covers purchased from a well-established group of insurers, with little opportunity for brokers to differentiate their offerings. But the manufacturing sector is a vast canvas of businesses with different risk profiles demanding individually customised solutions. And within this market lie some exciting pockets of opportunity where we can help you provide better client protection, better risk management advice, differentiating you from competitors so you can win and secure more business. For instance: Opportunities to improve workplace safety - saving disruption and cost Injury rates in manufacturing are second only to the mining, electricity and oil sector. For some manufacturing clients work accidents will be a persistent and disruptive problem, bringing regulatory and media scrutiny. We can help you help your clients manage down their workplace and vocational accidents with a powerful health and safety training system, with medical rehabilitation providing injured employees with the support of professional case managers to ensure the most appropriate medical treatment, helping their recovery and their return to the workplace. International support wherever in the world your clients might be Thousands of UK manufacturers export billions of pounds of products a year presenting worldwide exposures to goods and people as well as the risk of product litigation. Your clients can tap into our unparalleled global network with more owned offices (not just agents) in more countries than any other insurer, and more control over the services we can provide such as our outstanding US products liability claims handling, our global marine claims capabilities (wherever your clients want to be we already are) and our market leading group PA and travel protection for staff travelling overseas. Reassurance in the face of new and untested environmental exposures Increasing regulation, public sensitivity, focus on climate change and other green initiatives present new challenges to manufacturers. The environmental legislative climate across Europe and the UK is changing rapidly. As well as the financial costs of evaluating and cleaning up their mess, businesses now face new liabilities such as compensating society for the damage they have caused to the environment and reimbursing society for its loss of use of the environment while damage is being cleaned up. These are potentially very complex areas with as yet unknown financial implications. This presents a golden opportunity for brokers to add value and we can equip you with a range of environmental solutions for your clients. Directors of manufacturers need protection more than ever High workplace injury rates expose manufacturers to Corporate Manslaughter and health and safety laws with prison an option for most offences. Meanwhile in terms of business insolvencies manufacturing continues to be one of the worst affected sectors, and directors of insolvent companies are scrutinised by regulators particularly in relation to wrongful trading. Brokers have the opportunity to ensure their clients understand these threats and arrange adequate protection. AIG have outstanding D&O cover for directors of private and quoted companies and one of the most experienced D&O claims teams the insurance industry has to offer. Showing clients how their claims will be handled before they have a loss Delays and lost production after a claim are a major concern for manufacturers. This gives brokers the opportunity to reassure clients by giving an identity and precision to their claims service at the outset before they even have a claim. Our Claims Account Relationship Managers will meet with larger manufacturing clients to open clear channels of communication, discuss the claims protocols, procedures and service standards we commit to. This means you can demonstrate to your clients how their claims are going to be handled quickly and smoothly with no surprises to pre-agreed service levels. Insurance for manufacturers Opportunities for brokers 3

4 Improving workplace safety For some manufacturers, workplace accidents are a persistent, disruptive and expensive problem, bringing regulatory scrutiny, media attention and higher insurance premiums. We have a range of products and services to help brokers help clients manage down their workplace accidents. 22,000 Health and safety training You can help your clients save money and improve their health and safety training with one of the UK's largest integrated health and safety training and management systems, for free. The system delivers online training across a range of health and safety areas from manual handling to repetitive strain injury. Designed for all staff from shop floor apprentices to managers, many modules are industry specific, some are in foreign languages for clients with diverse UK workforces, and all are updated as legislation and requirements change. All modules are accredited by the Royal Society for the Prevention of Accidents (RoSPA). Modules can be accessed from any online PC and can be targeted at individual staff wherever training needs are identified. Each session takes around 30 minutes and can be fitted into busy schedules avoiding downtime and the need for group training sessions. Each module is followed by a test and the results are stored in a supporting database. This provides an audit trail of who has been trained, highlights additional training needs and helps demonstrate health and safety compliance and defend accident claims against the company. Feedback from manufacturing clients health and safety managers has been impressive. The system received strong plaudits for being user friendly, for its applicability across all staff levels, for the credibility conferred by its RoSPA accreditation, and for being better than some Health and Safety systems costing hundreds of pounds. Rehabilitation Our award winning rehabilitation services can help injured employees back into the workplace faster, minimising disruption and uninsured costs such as temporary staff. Rehabilitation can also strengthen relationships between employers and staff and reduce claims costs. The Case Manager monitors the injured person s recovery, providing advice and reassurance and liaising with employers to make sure that recovering employees return to work at the right time. Meanwhile our Vocational Consultants ensure a safe working environment with any necessary modifications to duties or equipment. We have helped thousands of employees, and their employers in this way and we provide medical and vocational rehabilitation as standard, at no extra premium costs to our employers liability policyholders. 4

5 Workplace injury rates in manufacturing (22,000 reportable incidents a year) are second only to the mining, electricity and oil sector. Contractor management We can help your clients improve the way they manage their contractors and reduce the costs of doing so with a powerful contractor management system - free of charge. Competent Contractor is a management service to make sure your contractors have the right skills and training for the work they are doing. It scopes all of your contractors, itemises every function that each one performs, identifies individual contractor employees' training and qualifications and then highlights any gaps. (There is a large body of training and qualification awards for different industries and this in itself could be a major task for businesses with hundreds of contractors.) But the system goes much further. Using on-site smart card readers, it confirms the identity of each individual contractor as they report on-site and checks that they have the right skills for the work they are doing before they are allowed entry. The system also means your clients can track their contractors by providing ongoing management information. Managing your contractor base in this way can be a significant undertaking for businesses in terms of time and staff. You can arrange it free for AIG liability customers. High workplace accident rates present opportunities to prescribe services that reduce accidents and save costs including a powerful free health and safety training system, claims defensibility services and our award winning rehabilitation. Insurance for manufacturers Opportunities for brokers 5

6 International support Even purely UK domiciled manufacturers may face international product liability exposures as their products find their way into export markets. And for more internationally active manufacturers there may be risks to goods and people. For clients with overseas exposures, AIG is an expert insurance partner with international experience ingrained throughout our culture. Our global network has more owned offices (not just agents) in more countries than any other insurer, which means more control over the service we provide your clients. Here in the UK brokers receive expert service from underwriting and claims staff renowned for their skill and confidence handling international issues. Overseas exposures to goods, people and products liabilities provide opportunities to tap into our unrivalled global network and exceptional range of international claims services. Products liability Nowhere are our international capabilities more clearly demonstrated than in the US; a most challenging products liability environment with high defence costs, awards set by jury that can reach millions and where overseas manufacturers may be treated differently to American ones. None of this holds any mysteries for AIG, part of an American company with US product liability underwriting expertise throughout our UK regions. More importantly for your clients is the strength of our US claims service. Class actions, sensationalised media coverage and a deep pocket syndrome all add to the cost of a US liability action. AIG understands all this with around 100 unit managers, complex case directors and claims analysts for products liability based in our US claims centres in New York, Dallas and San Francisco. The depth of this expertise is a huge reassurance for manufacturing clients who may not always have control over the final destination of their products. Marine, goods (and people) in transit The sun never sets on our marine claims network and wherever your clients goods are in the world there is a local AIG office nearby ready to receive and progress a claim. All our local offices are managed from our regional centres, so clients' customers are able to resolve their claim in their own country and language, while our client has access to our regional management to address any particular concerns or requirements they may have. Meanwhile our market leading Group PA and Travel coverage for staff and travelling employees can settle over 90% of baggage and money claims within just 15 minutes. 6

7 Environmental sensitivities Increasing regulation, public sensitivity and focus on climate change presents new challenges to manufacturers. With the introduction of last year s Environmental Damage Regulations many companies throughout the UK face increased environmental exposures. Businesses already face the costs of investigating, evaluating and cleaning up their mess. Now they face new liabilities such as compensating society for the damage they have caused to the environment and reimbursing society for its loss of use of the environment while damage is being cleaned up. These are potentially very complex areas with as yet unknown financial implications. Against this uncertainty we can equip you with a range of environmental solutions to provide your clients with reassurance and financial protection. Specialist environmental solutions AIG is an industry leader in this field, helping customers uphold environmental standards through risk mitigation and insurance. We offer a range of specialist environmental insurance products covering damage from gradual contamination to biodiversity damage, complementary and compensatory remediation, defence, mitigation costs and other provisions of the 2009 Environmental Damage Regulations New enviro-friendly property reinstatement We are also delighted to offer manufacturers our new Environmentally Friendly Reinstatement for Property, under which the insured may, after a loss, reinstate their property with green materials to achieve certification by the UK s leading green building rating standard, BREEAM. Green building creates structures and uses processes that are environmentally responsible and resourceefficient throughout a building's life-cycle, and we are proud to collaborate with BREEAM on this new offering. Increasing environmental regulation and public sensitivity challenge manufacturers more than most sectors and provide golden opportunities for brokers Insurance for manufacturers Opportunities for brokers 7

8 Claims speed & transparency Manufacturing clients are perhaps more sensitive to how their claims are going to be handled than any other industrial sector. For manufacturers, delay and lost production time can be critical which is why our Claims Account Relationship Managers have so much to offer these clients. Manufacturers concerns about delays in the claims process give opportunities to reassure clients by giving identity and precision to their claims service at the outset before they even have a claim Claims Account Relationship Managers Each of our large clients will receive their own dedicated Claims Account Manager to facilitate the claims process, and to ensure a consistent service for our clients and rapid access to our claims network. Meet with clients before any claim The Claims Account Relationship Manager will meet with our client before the submission of any claim to open a clear channel of communication and establish a benchmark for service levels. They will discuss the protocols, procedures and service standards we commit to in handling the clients claims. They will organise the allocation of a full claims team to support the client and they will explain how we will work with the client to manage any claims transitions from any previous insurer. No surprises Our Claims Account Relationship Managers are there to reassure our clients. They can explain our approach to reserving, our value added services (such as rehabilitation or reputation protection) and they will be available to help clarify and resolve any ongoing issues for clients. We want our clients to know that if they do have a claim, it s going to be handled quickly and smoothly with no surprises to preagreed service levels. 8

9 Protecting directors Many manufacturing clients are a lot more concerned about their possible D&O liabilities than they were a few years ago. High workplace injury rates expose manufacturers to tougher legislation and manufacturing continues to be one of the worst affected sectors, and directors of insolvent companies are scrutinised by regulators, particularly in relation to wrongful trading. Worried about legislation The Corporate Manslaughter bill is designed to make it easier to convict companies, but at the same time exposes the behaviour of individual executives to greater scrutiny. This is a real issue for manufacturers given the relatively high accident rates in the sector. Apart from the impact on individual directors the financial penalties against companies convicted of Corporate Manslaughter are potentially very high. (The Sentencing Advisory Panel recommended fines between 2.5% and 10% of the businesses average annual turnover). Meanwhile tougher health and safety penalties mean that prison is now an option for most offences. Worried about economic conditions A second reason for the importance of D&O for manufacturing clients is a tougher economic climate bringing more business insolvencies. The behaviours of directors leading up to insolvency are scrutinised particularly in relation to wrongful trading. Wrongful trading is a very difficult area for many directors who may instinctively want to trade out of a difficult situation. But this could expose them to recovery actions by the liquidators on behalf of the company s creditors. Any suspicions the liquidator has about the behaviour of individual directors may lead to disqualification proceedings adding to the worry and the expense. The implications for directors involved can be very serious. D&O giants The good news is that these actions can be defended, and no-one has more experience of helping directors do this than AIG. We are one of the UK s leading D&O insurers and our range of D&O products for private and quoted companies provides broader cover, with fewer restrictions and more value added services, underpinned by one of the most experienced D&O claims teams the industry has to offer. Tougher regulation and economic environment provide opportunities to make sure directors of manufacturing clients understand their risks and have the right protection Potential Corporate Manslaughter penalties The financial penalties against companies convicted of Corporate Manslaughter are potentially very high. (The Sentencing Advisory Panel recommended fines between 2.5% and 10% of the businesses average annual turnover) 2.5 % 10% Insurance for manufacturers Opportunities for brokers 9

10 Protecting reputations According to research manufacturers see bad PR and the risk to their corporate reputation as one of their most significant liability risks. In the immediate aftermath of a major covered incident the way a business communicates with regulators, media, customers and employees can have a dramatic effect on how the businesses brand is perceived. Crisis Communications Prompt and professional communications can help avert a full-blown crisis. We provide our liability clients with up to 100,000 of crisis communications consultancy. This could include tactical and strategic communications advice from communications to staff, to external messages to customers, to press releases or coaching for media interviews. The cover is triggered if any event covered by our liability insurance threatens adverse publicity, financial loss or causes material interruption to the business. We include the coverage at no cost (although it is subject to client coinsurance of 20%) because in the wake of disaster and for the sake of the business, it s vital that its leaders communicate clearly, consistently and professionally. Product Recall Product recalls present real threats to manufacturers with loss of sales, loss of customer confidence, loss of hard-won shelf space, and loss of supply contracts. Our product recall insurance for manufacturers of consumer goods, food, drink and topical products provides the expertise of independent product recall consultants to guide clients through the critical first few weeks of a recall. We cover the key expense areas such as warehousing, transportation costs, advertising, overtime, additional staff or storage space, disposal costs, redistribution costs and loss of gross profit. Malicious contamination and product extortion are also included in the cover and for these incidents we provide clients with access to independent security consultants to assist. To help minimise the impact of a recall all of our product recall policyholders are entitled to pre-loss crisis management planning and loss prevention services through leading international crisis management specialists. Manufacturers' concerns about poor PR and impact on brand present opportunities to recommend pragmatic and differentiated solution to optimise communications in a crisis. Specialist product recall solutions for manufacturers of finished goods, component parts, food, drink, cosmetics and pharmaceuticals. 10

11 Cost control In tough economic and competitive environments, with increased international competition, emerging markets driving down prices for their products and consumers spending less, manufacturers have intense focus on cost control. Many of our complimentary services present opportunities for brokers to help take cost out of their manufacturing clients businesses as well as reducing their claims frequencies and their overall claims costs. Rehabilitation and crisis containment We provide Rehabilitation at no extra premium cost to employers liability clients. This is because improving medical treatment for injured employees can help them return to work faster, reducing disruption, and claims costs. We also provide free full access to a comprehensive health and safety training system to employers liability policyholders because better training results in fewer accidents, reduced damages and lower claims. Meanwhile our liability clients receive Crisis Containment services to optimise their communications and protect their reputation after a crisis, because this can reduce the likelihood of subsequent claims against the company and its directors. We provide other cost saving services too. At work drivers You can help your clients reduce road accidents and save costs with a free risk profiling tool developed exclusively by AIG with the Transport Research Laboratory. Driver Profiler analyses different aspects of each individual driver, identifies each driver s level of accident risk and generates suggestions to improve their road safety. The system also provides managers with a comprehensive reporting suite so they can pinpoint high risk areas and target training and risk management where it will have most effect. The system is effective for occasional business car drivers through to full time professional lorry drivers, and you can arrange it free for your AIG motor fleet clients. Product safety We help our clients and their suppliers improve their product safety performance, with training and risk management tools to help reduce product related accidents. We also help manufacturers track the safety performance of their suppliers with an audit of their entire supply chain that profiles each supplier s strengths and weaknesses across performance indicators including labelling, standards and legislation, production facilities and quality control. This assessment is conducted at no cost to clients and helps track their suppliers performance and identify problem suppliers. Credit management Global Limits Manager is a powerful credit management tool which helps set and monitor credit limits across the customer portfolio. It helps reduce the cost of credit delinquency by identifying late paying accounts and allowing more targeted collections action. It can help identifying riskier accounts and reduce the cost of bad debts by using customer risk intelligence to help manage deteriorating trading relationships. Global Limits Manager provides valuable management information and reduces operational risks and administration costs by automating many activities. It also enables a more focussed sales approach by revealing the less risky customer accounts with credit headroom. Global Limits Manager is a highly effective interface with AIG Trade Credit Insurance or it can be used as a stand-alone credit management system* Many of our products and services provide opportunities to take cost out of your client s business such as the cost of workplace accidents and disruption, health and safety training costs, the costs of managing a contractor base, the costs of evaluating product safety, the costs of atwork driving accidents and credit management *Global Limits Manager is available for an annual fee. Costs are based on clients turnover. See end of report for contact details. Insurance for manufacturers Opportunities for brokers 11

12 Diversity and a customised approach The manufacturing sector is wide and diverse, and many businesses within it have distinct risk profiles and particular insurance requirements. With our strong technical underwriting expertise across such a wide range of products we can help brokers create finely-tuned insurance programmes to meet these individual needs, providing better protection and better risk management. D&O Employment Practices Airside Liability Trade Credit Public Liability Material Damage Aviation Products Liability Product Recall PA and Travel Excess Liability Pension Trustee Liability Employers Liability Motor Fleet Kidnap & Ransom Products Liability Business Interruption Crime Political Risks Goods in Transit Marine Environmental Liability 12

13 Perhaps the only thing that manufacturers have in common is that they make things. Everything else, from wood turning to aerospace, is disaggregated: different production, different markets, different innovation and different economic performance. This diversity has reached new levels in recent years as companies have sought new ways to grow or just stay afloat: expanding up and down their value chain to include assembly, distribution and servicing in their business activities; developing complementary activities such as design and consultancy services, or entering adjacent markets (such as an agricultural machinery manufacturer using its skills and resource to make equipment for baggage handling). Within this diversity AIG s distinct underwriting specialism across one of the widest product ranges in the industry, gives brokers a tremendous opportunity to create highly individual insurance solutions. So our brokers can provide better client protection, better risk management advice, differentiate their offerings from competitors, and win and secure more business. Tailored risk management programmes for UK based manufacturers Can be extended to manufacturers with overseas exposures and operations Aimed at (but not restricted to) manufacturers with annual turnover 50m - 500m Commercial Combined for manufacturers with turnover less than 50m Insurance for manufacturers Opportunities for brokers 13

14 Further information You can find more information, downloads and brochures for the products and services described in this note from the insurance for manufacturers page at Online health and safety Rehabilitation US products liability Marine cargo Personal accident and travel Environmental insurance Protecting directors Reputation protection Contractor management Driver Profiler Credit management Commercial Combined 14

15 If you would like to know more about our products and services for your manufacturing clients please speak to your AIG Business Development Manager. Insurance for manufacturers Opportunities for brokers 15

16 BELFAST Enterprise House 55/59 Adelaide Street, Belfast BT2 8FE Tel: Fax: BIRMINGHAM Embassy House 60 Church Street, Birmingham B3 2DJ Tel: Fax: BRISTOL Broad Quay House Prince Street, Bristol BS1 4DJ Tel: Fax: CHELMSFORD Victoria House, 4th Floor, Victoria Road Chelmsford, Essex CM1 1JR Tel: Fax: CROYDON 2-8 Altyre Road Croydon, Surrey CR9 2LG Tel: Fax: LEEDS Yorkshire House Greek Street, Leeds LS1 5SX Tel: Fax: LONDON 58 Fenchurch Street London EC3M 4AB Tel: Fax: MANCHESTER 4th Floor, 201 Deansgate Manchester M3 3NW Tel: Fax: NEWCASTLE Rotterdam House, 116 Quayside Newcastle-Upon Tyne NE1 3DY Tel: Fax: READING Soane Point 6-8 Market Place, Reading RG1 2EF Tel: Fax: GLASGOW 4th Floor, 69 Wellington Street Glasgow G2 6HJ Tel: Fax: AIG is a world leading property-casualty and general insurance organisation serving more than 70 million clients around the world. With one of the industry s most extensive ranges of products and services, deep claims expertise and excellent financial strength, AIG enables its commercial and personal insurance clients alike to manage risk with confidence. Within the UK, AIG Europe Limited is one of the largest providers of general insurance. With offices throughout the country, we insure many of the UK s top businesses, thousands of mid sized and smaller companies, as well as many public sector organisations and millions of individuals. For additional information please visit our website at AIG Europe Limited is authorised and regulated by the Financial Services Authority (FSA number ). This information can be checked by visiting the FSA website ( Registered in England: company number Registered address: The AIG Building, 58 Fenchurch Street, London, EC3M 4AB. AI /12