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Robotics: Successfully Navigating the Insurance Minefield, Risk Management

July 25, 2013      

Finding cost-effective insurance coverage can be an unpredictable process (See Part I: Are Robots Insurable? Surprising Answer). So, what can robotics developers, startups, and manufacturers do to improve their chances of successfully navigating the insurance landscape and risk management? Robotics Business Review spoke with several experts to find out.

Be understood

To the extent that you’re doing something different than a traditional robot, make sure the insurance company understands just how big the difference is, said Scott Eckert, CEO of Rethink Robotics.

“There is a new category of robots emerging that are sensor driven and that are aware of and responsive to their environment,” he said. “These robots create a very different safety paradigm than the traditional industrial robots that must be protected by cages because they are unaware and therefore not responsive to their environment.”

Make sure that your insurance company understands the difference between emerging, collaborative robots and traditional industrial robots, Eckert explained. This can also double as an opportunity to demonstrate the safety of the system.

“Make sure that whoever is underwriting the insurance understands clearly what the product is,” he said. “In our case, Baxter is very different from a traditional industrial robot but once you see it and operate it, it becomes abundantly obvious what the risks involved are and are not.”

Experience counts for risk management

Robotics developers, startups and manufacturers should seek out an insurance broker that has expertise with unique technology risks and access to specialty insurance carriers, said George Weimer, Assistant VP and Senior Underwriting Specialist for the technology insurance specialty for the Chubb Group of insurance companies.

“Partner with your broker and insurance carrier’s loss control, claims, and underwriting personnel. Insurance companies like the opportunity to meet with current and potential clients so they can learn about and understand the risks they are insuring,” said Weimer.

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The information a client shares about their business and how they manage risk is factored in to the terms, conditions and premiums offered by the insurance company, adds Weimer.

Robotics startups and developers can do “darn little” to bring their premiums down, said Donald Light, director, Americas Property/Casualty Practice at research and consulting firm Celent.

“The little they can do is find a broker who is familiar with placing these kinds of unique specialty insurance risks,” said Light, who advised companies to try to find “at least one broker, and possibly even more than one,” who is familiar with the robotics market.

Robotics startups and researchers also need to make an effort to understand the insurance company’s concerns, said Light.

Insurance companies are looking for a risk assessment and a risk prevention (or “loss control”) program to give them more comfort in giving a “somewhat lower premium than otherwise would be the case,” he noted.

And whatever type of robot you’re trying to insure, it’s important to understand the types of liabilities, accidents and losses that could occur with its use.

“Once your company has developed that understanding, you need to think about frequency, severity, and designing appropriate measures to minimize the chances of those losses or accidents occurring,” said Light.

“If you have that sort of information available, you’ll have a better chance at getting insurance at all and getting a more reasonable rate than if you just say ‘I have a robotic companion and I’m sure it’s quite safe,” he said.

Get the design right

Security and safety concerns can force certain design limitations, but some safety features can greatly enhance overall performance, so it’s not all about compromise, says Rethink Robotics’ Eckert.

Besides the in-built safety features, which put visiting insurance agents at ease, the design team limited Baxter’s functionality to handling 5-lb. loads with an arm speed of around one meter per second.

“If Baxter could carry significantly higher weight or move significantly faster, it would be more difficult to make it safe without cages,” added Eckert.

So, with safety in mind, the design team built extra compliance features into Baxter’s joints.

“Every joint is fully-compliant,” Eckert said. “That isn’t a compromise for the sake of safety though. It’s actually a benefit to how the design works because it makes for a fluid and flexible motion as well as making the robot very safe in all operations.”

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Robotics companies and insurers should collaborate on the development of regulations for the industry, said Robert Wenzel, Director of London Global Laboratories, a consultancy that specializes in commercializing robotics R&D.

“The aerospace industry, for example, has lots of safety regulations,” he said. “Companies have to implement certain development and risk management processes by law. Furthermore, companies have to integrate safety systems into their products by law.”

The stricter the regulations, the cheaper insurance premiums are likely to be.

“If insurance and robotic companies would collaborate they could define the requirements for the development and risk management processes and safety systems and finally offer a fitting insurance product,” said Wenzel.

For now, start-ups will mostly need to rely on their own efforts.

“You have to have really good processes in your company,” Wenzel said. “You have to have good risk management and based on this, you can have a good talk with insurers.”

See also Part I:: Are Robots Insurable? Surprising Answers