Smart warehouses, their risk management measures, and what we can learn from past accidents
10/11/2021
How the increase in robotics use changes the risks faced by business owners and their insurers?
Whilst many warehouses are now built to accommodate a high usage of robotics, there are also numerous buildings being retrofitted with these systems in order to maximise productivity. We see robotics being crammed into spaces not originally intended for the technology. If there is an incident, this can mean there is little space to supress the fire, with the result that it gets out of control. In order to run a significant volume of robots to support the business, it requires electrical input which far exceeds that traditionally used to run distribution centres where people were the primary workforce. This can also increase the risk of fire.
Do warehouses employing more automation require a different policy to those that are not automated?
Insurance policies should be tailored to the customers’ needs and the business practices being undertaken. Whilst an increase in automation does give rise to new risks, it also reduces others, such as human error. The greatest impact following an event in many settings using robotic automation is the knock-on impact and business interruption. Such cover is commonly available in the property insurance sector.
What cover is currently available for smart warehouses?
The traditional P&C markets are still very much there for warehouse risks. However, capacity will be driven by the quality of information provided and the risk management practices that are in place.
What risk management measures insurers are expecting warehouses to have in place?
Sprinkler systems are an invaluable protection measure for warehouses with a long and proven history of controlling fires in the early stages. When correctly designed, installed and maintained they offer an extremely reliable method of controlling the fire before the fire service attend for final extinguishment. Robotic warehouses, however, are creating significant challenges for the fire service to extinguish the fire as access to the seat of the blaze may be extremely difficult or even impossible. Risk management can focus on reducing the risk of fire, but the risk of fire will always remain. When designing new robotic warehouses, reviewing the sprinkler design and layout to avoid these challenges for the fire service is a critical risk management step.
From a property perspective we are still looking for non-combustible construction where possible and theft provisions such as CCTV, security lighting and fencing. Another element that is in sharp focus is a tested business continuity plan and a detailed knowledge of their customers’ and suppliers’ exposures. And last but by no means least good control of what we refer to as the human element, such as good cleaning regimes, pallets stacked 10 metres from the building and electrical charging areas free of combustible material. Working with insurers risk management specialists is an excellent way to understand and control your risks.
How the increase in robotics use changes the risks faced by business owners and their insurers?
The move to more robotics has many positive and negative effects. The human error reduces as does potential arson from employees or blazes caused by smokers. However, with any new technology additional exposures emerge. As always, our biggest concern is fire and we have seen incidents where robotics have caused increased spread of fire and even robot collisions triggering blazes themselves. As with any warehouse the key factor going forward will be understanding the exposures and having the right risk management practices in place.
What losses could insurers be liable for in case things go wrong?
The physical damage arising from the loss would commonly be covered, as would the business interruption losses flowing from the event. Such coverage may vary depending on the limits and deductibles. It may also be the case that insurers, working in conjunction with the customer, would look to recover any losses in the event it was possible to identify the cause of the loss as being third party equipment.
If there is a claim, are warehouses insured for the orders that cannot be fulfilled?
Business interruption is a complex area of insurance, as has been highlighted by Covid-19 interruption, and the coverage available under policies varies significantly. Orders which have been made and paid for, which now cannot be fulfilled may be covered, as might orders which now cannot be placed provided that business projections had anticipated such orders.
What can we learn from the accidents that happened so far?
We should always focus on the lessons learned following losses so that our respective industries can prevent and mitigate future losses. Effective and operational fire suppression systems are critical in all business settings, as well as clear procedures and training for staff to follow, including how to report and isolate incidents. Sensor technology is also being used to identify problems before they become uncontrollable, such as temperature sensors to detect if machinery is overheating, or pressure sensors to detect of possible escape of water.
Is more regulation needed from the government to ensure warehouse safety amid the raise of automation?
Government guidance currently only recommends sprinklers in warehouses of more than 20,000 square metres. This leaves Britain lagging behind other European countries where sprinklers are required in sites as small as 1,000 square metres in the Netherlands and 800 square metres in Norway. We want to see automatic sprinkler protection t made compulsory in all new warehouses over 2,000 square metres, roughly a third of the size of a football pitch.
Against the tens of millions of pounds Britons spend online every day, current sprinkler standards look increasingly inadequate. As well as posing a threat to life, warehouse blazes devastate businesses, send shockwaves down supply chains, and lead to the loss of jobs and productivity. A failure to make new warehouses more resilient to fire risks damaging Britain’s growing e-commerce economy, and the many jobs and businesses that depend on it.
