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The breakdown of equipment is a critical issue for businesses as it can result in costly property damage and business interruption. In 2016, FM Global saw that equipment breakdown was driving more severe property losses than natural hazards or fire loss, especially in the power generation, chemical, pulp and paper, and metals and mining industries.
The Johnston, Rhode Island-based insurer developed Equipment Predisposed, a predictive analytics tool designed to help risk managers prevent losses and to reduce large property losses of over
FM Global has more than 250 field engineers who go out and analyze about 60,000 pieces of critical equipment across its client base, said Brion Callori, senior vice president, engineering and research, at FM Global. They assess “what the deficiencies of a particular piece of equipment are, quantify in financial terms the impact if something goes wrong, and identify how they can improve that equipment,” he said.
Equipment Predisposed, a winner of a 2021 Business Insurance Innovation Award, focuses on four types of equipment that generate the most losses: gas turbines, steam turbines, transformers and generators.
A range of mechanical breakdown issues can occur with the equipment, Mr. Callori said. “When they break down it’s costly from two perspectives. As equipment gets more complex and larger the property value is significant, but what really drives the size of loss is the time element component,” he said.
Businesses tend not to have the redundancies built into their systems that they had decades ago, making it more difficult to keep running if a critical piece of equipment breaks down, and replacements take longer during the COVID-19 pandemic, he said.
The interactive, online tool feeds descriptive characteristics such as the age, make and model number of the equipment, information on its operational cycles, the field engineers’ evaluation and a series of loss data into an algorithm that comes up with a ranking.
The goal is to prevent breakdowns, but the tool also provides benchmarking, “so that across the fleet of a type of equipment that we insure, we can identify for clients where they rank and give them an idea from a frequency and severity perspective” whether an individual piece of equipment will be less or more likely to have a loss, Mr. Callori said.
From there, businesses can better understand where they should make capital investments to improve their equipment, he said.
Restrictions on in-person collaboration during the COVID-19 pandemic do not seem to have stifled innovation in the insurance and risk management sector.