An analysis of large risk losses reported in 2018 to FM Global has revealed equipment breakdown as the major cause of all property-related losses last year, accounting for 28% of the company’s losses across all industries based on gross loss dollar amount.
Findings show that 62% of equipment breakdown losses were due to lack of maintenance, accounting for three-quarters of all equipment loss claims paid; while nearly half involved a significant human element impact or influence, including operator training, which accounted for 43% in equipment losses.
“A large number of those equipment breakdown losses last year could have been prevented,” said Brion Callori, FM Global senior vice president of engineering and research. “However, in a booming economy, many companies aren’t necessarily taking their facilities offline for preventive maintenance, often choosing instead an expensive roll of the dice rather than a more conservative bet. Unfortunately, that strategy only works for so long before problems arise that can lead to expensive repairs, decreased revenue, and potential market-share loss for companies that can’t fill orders when their equipment breaks.”
Callori said the insurer has seen increasing numbers of losses from equipment breakdown for the past five years, especially in the pulp and paper, chemical, electric utility, and mining industries.
“While our data also shows those large losses diminish as engineering site visits and client tenure increase, if companies don’t take measures to prevent equipment breakdown, they put their business resilience at risk,” Callori said.
Source: Insurance Business Australia