IBC: In the equipment breakdown arena, what responsibilities does an insurance company have with regards its brokers and their clients?
Joseph Alcaraz: In Canada, the owners of large or hazardous boilers and pressure vessels must ensure they are inspected and issued a certificate to operate. Insurers in Ontario and Quebec that provide equipment breakdown coverage are required to perform inspections and issue certificates. The certificate is proof of inspection that must be renewed based on provincial guidelines; therefore, the boilers and pressure vessels are inspected regularly.
When equipment breakdown insurance is not in place, the inspection of these boilers and pressure vessels is completed by the provincial authority, and those costs will be passed along to the owner. An equipment breakdown insurer will include the costs associated with this inspection service as part of the premium they receive. Often, the owner will find that the cost to include equipment breakdown coverage in their insurance portfolio is affordable, given the need to inspect as per provincial requirements. Therefore, this inspection service and certificate issuance completed by insurers can be considered a value-add to clients.
IBC: On the loss control side, how have you found working in the equipment breakdown space?
JA: In general, the insured is focused on maintaining their equipment, as it is the lifeline of their business. If they are a manufacturer and do not maintain their equipment and it breaks down, manufacturing stops – they can be rendered unable to fill orders and possibly
lose customers. When we complete equipment breakdown inspections and/or a risk assessment, we are not only conducting an inspection, but we are also looking for opportunities to share helpful risk engineering best practices. Our goal is always to help by sharing our expertise with our insureds to reduce or eliminate the exposure to loss as much as possible.
IBC: How are the insurers in this space?
JA: There are a lot of areas where insurers add value, but the client relationships could be further enhanced by delivering awareness and presenting best practices when conducting inspections. The opportunity we focus on with our insureds is the importance of maintaining equipment. A breakdown could result in a significant business interruption loss – a loss that is so great that it might make it difficult for an insured to fully recover, including maintaining their client base.
Insurance companies that provide this inspection service have an opportunity to provide a great client experience, and that’s what we’re striving for.
IBC: What should brokers know about equipment breakdown insurance?
JA: Supporting clients in discovering the importance of coverage and creating awareness that they have an exposure can be the two biggest challenges for brokers. Brokers need to understand that an equipment breakdown insurance product can help insureds fill the coverage gap in a standard property policy.
Brokers also need to support the client in understanding their obligations when it comes to equipment that requires inspections and certificates as per provincial guidelines. These are opportunities for both brokers and insurance companies to provide a true value to our mutual clients.
