Five ways embedded insurance is changing the heavy machinery industry

The heavy machinery industry is undergoing a digital transformation, supported in part by embedded insurance. These solutions offer insurance at the point of sale or lease of equipment for operating risks, third-party liability, machinery breakdown, and other events. By integrating relevant insurance into products and services, original equipment manufacturers (OEMs), leasing companies, and dealerships are reshaping the way they manage risk and deliver value to customers. Here are five ways embedded insurance is changing the heavy machinery industry by:

1. Mitigating the costly impact of equipment breakdowns

Equipment breakdowns can have severe financial and operational consequences for heavy machinery companies. Unplanned downtime costs industrial manufacturers as much as US$50 billion a year, according to one estimate. The leading cause of this downtime is equipment failure with the average manufacturer facing 800 hours of downtime annually. These non-productive hours result in lost revenue and also incur additional costs relating to labour, wasted materials, and reduced capacity.

Embedded insurance solutions can help mitigate these risks by providing comprehensive coverage for equipment breakdowns — minimising operational disruptions and the related financial impact. By seamlessly integrating insurance into the product or service offering, OEMs, dealerships, and leasing companies can help ensure their customers are protected from unexpected machine repair expenses.

When using leased equipment for a project, contractors may be held responsible for any damage to the machinery, as certain lenders do not have coverage included in their own contractors' policies.

2. Enabling predictive maintenance and reduced downtime

Embedded insurance goes beyond traditional coverage by leveraging data captured from an end-to-end customer journey to enable predictive maintenance and reduce downtime. By collecting and analyzing real-time data using telematics (a method of monitoring cars, trucks, and equipment that uses GPS technology) and internet of things (IoT) sensors, companies can monitor equipment health, identify potential issues, and schedule maintenance before breakdowns occur.

The use of predictive maintenance for complex machinery is key to reducing potential claim costs and achieving premium discounts for well-maintained equipment during renewals which can be passed down to the end user. Additionally, telematics data relating to maintenance can be used to predict losses. This data can help speed up claim approvals, as claims are anticipated by the approval system from the insurer or third-party administrator.

3. Providing the long-term benefits of tailored cover

Telematics plays a crucial role in enabling personalised, usage-based embedded insurance coverage in the heavy machinery industry. By capturing real-time data on equipment usage, operator behaviour, and environmental conditions, companies can offer embedded insurance policies tailored to individual risk profiles.

For instance, OEMs can leverage telematics data to offer embedded insurance policies that reflect the specific driving behaviours and usage patterns of each operator, rather than general assumptions. By promoting safer operating practices, this can lead to robust risk assessment and pricing, benefiting both the insurer and the customer.

4. Strengthening sustainability objectives

For investors, clients, and manufacturers, embedded insurance can be part of a strategy to introduce more sustainable practices to meet regulator demands, due in part to the following:

Partnerships with A-rated insurance carriers who are committed to addressing environmental, social, and governance (ESG) concerns.
Access to ESG risk-rating tools to help track ESG performance of suppliers involved in the insurance program.
Use of IoT technology to drive operational and energy consumption efficiencies.

5. Saving time

By streamlining the process of obtaining coverage for contractors, embedded insurance can save significant time and effort searching for an insurance provider. The insurance program is integrated into the financial leasing platform, making it easier to access and obtain comprehensive coverage which is tailored to heavy machinery contractors and buyers. This ensures that in the event of a breakdown, theft, or accident, the contractor's bottom line is protected from financial impacts.

Conclusion

As the heavy machinery industry evolves, embedded insurance will likely play a pivotal role in shaping the future of risk management, customer experience, and operational excellence. Embedded insurance programs simplify the insurance procurement process, providing contractors with peace of mind, allowing them to focus on their core business operations. With comprehensive coverage readily available, contractors can mitigate potential risks and safeguard their financial stability.

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Case Study

Five ways embedded insurance is changing the heavy machinery industry

1. Mitigating the costly impact of equipment breakdowns

2. Enabling predictive maintenance and reduced downtime

3. Providing the long-term benefits of tailored cover

4. Strengthening sustainability objectives

5. Saving time

Conclusion

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Five ways embedded insurance is changing the heavy machinery industry

1. Mitigating the costly impact of equipment breakdowns

2. Enabling predictive maintenance and reduced downtime

3. Providing the long-term benefits of tailored cover

4. Strengthening sustainability objectives

5. Saving time

Conclusion

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Related insights

Consumer cyber protection in the age of digital dependence

Equipment manufacturer achieves 99% penetration rate on leasing programme via affinity insurance

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