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MARKETING

The manufacturing sector:
Strong growth results in more risks

Putting wisdom to work

By Michael J. Moody, MBA, ARM


The statistics with regard to the overall U.S. economy appear to be improving with each passing month. While it certainly varies by industry sector, nevertheless, overall, the economy looks like it's finally headed in the right direction. One sector that appears to have shown significant growth in recent months is the manufacturing industry. In a recent survey, conducted by Travelers Insurance Company, 200 professionals from the manufacturing sector confirmed that data show that 2012 was a record year for manufacturing revenues. Further, they also reinforce that expectations for 2013 are positive as well.

"Agents and brokers must make sure that they are assessing changing risk and using all resources that are available to them to make certain the insured is properly covered."

—Jim Mandes, Manufacturing Industry Manager

Travelers' Commercial Account

Growing concerns

Travelers has dedicated significant time and talent in offering products and services to assist brokers and their insureds in taking advantage of the unique opportunities "that this uptick can provide." Travelers has used the recent survey to help plot its course for working with manufacturers and their brokers. "We have looked at the terms we saw surrounding growth and the reinvigoration of the manufacturing industry and made our plans accordingly," notes Jim Mandes, manufacturing industry manager for Travelers' Commercial Accounts. "All of this growth presents tremendous opportunities," he points out.

The survey, which includes information from general managers, directors, owners and partners from industry specialties like metals, food, and plastics, provided significant insight into both the short-term projections as well as long-term strategies.

One of the key findings had to do with hiring qualified employees. "This was a very important topic since 88% of the decision-makers indicated that they are already hiring new employees or were expecting to do so during 2013." As a result, the current hiring situation is difficult. "As I discuss these issues with various manufacturers, they typically indicate that finding good people is their biggest challenge," says Mandes. "Capital investment management during a downturn usually causes a lot of pent-up demand," he says. But now that the economy is starting to pick up again, production is starting to pick up as well. He goes on to note, "For some operations its three shifts, seven days a week." However, he says, "Operating at full capacity raises additional concerns for manufacturers."

In order to assist employers to better deal with employment-related issues, Travelers has developed several employee-related service offerings. For example, the company can provide insureds with an online pre-employment screening tool called the Job Candidate Profile. In addition, Travelers has introduced a Virtual Risk Manager, which is designed to assist employers in identifying and hiring applicants who tend to exhibit reliability and safety-conscious behavior along with providing a safe workplace.

Another major concern of the surveyed group, according to Mandes, is the "interconnectivity to the worldwide business community." Not that many years ago, international business was the exclusive domain of Fortune 500 corporations, "but things are changing quickly," he notes. He states that the study confirms just how quickly this landscape is evolving. For example, "The survey reveals that 71% of the companies are conducting sales outside the United States." However, this is not the most revealing statistic says Mandes. The most surprising result is that 67% of the group received a quarter or more of their supplies from a single-source supplier either onshore or offshore.

"With single-source suppliers you have all the potential problems that can arise when you depend on one major component in the supply chain." Actually, he says, there are at least two different aspects to be concerned about, regardless of where the supplier is located, whether it's down the street or as far away as China. "First of all, you need to make certain that you have planned for the scenario of an interruption from your supplier. And," he adds that "there is also the product liability aspect, where you need to make certain that the products are being manufactured to your specifications." Mandes says, "This, of course, really gets to the core of underwriting product liability." During this process, it becomes obvious that there may be issues with regard to contact risk transfer and making certain that the insured is adequately protected. He adds, "This is another value-added service Travelers can provide.

"One of the other tools," Mandes notes, "we make available for domestic planning in case something goes wrong is called Open for Business." This resource is an online training module that "we designed in conjunction with the Insurance Institute for Business and Home Safety." The module is designed to call attention to a wide variety of exposures. The system makes certain that "there are sufficient backups as well as potential redundancies when there are critical points in the process."

Service offerings that address important issues

Mandes points out that he is from a part of the company "that is organized around the middle market and in that regard we operate very much on the deal-by-deal basis. We analyze what each account requires and make certain that the insured is aware of them. This is particularly true with things like specialized machinery and equipment specific to the industry." Very high-value and very complex individualized equipment "can be difficult to obtain in case of an emergency."

From Travelers' perspective, the goal is to determine both the coverage and services that individual accounts need and to coordinate that effort with the local brokerage community. With its underwriting, risk control and claims operations, "we are there to assist the broker in maintaining his relationship with the client." From that perspective there are many tools, whether it's Webinars dealing with specific hazards that are related to things like industrial hygiene or resources that help set up safety programs.

Mandes points out that "the most important thing to consider is the hazards that are now presenting themselves. Whether we're talking about supply chain issues, or new hazards resulting from restarting operations, or some other aspect of the manufacturers operation, you need to consider and use the resources that are available to you. One of the points of our commitment we have to our insureds as well as the brokerage community is to bring a lot of resources to the table. From our standpoint each broker should be aware of our capabilities and how we can assist them."

Conclusion

From Travelers' standpoint, Mandes notes, "many insureds we are dealing with are entering into a new marketplace." Thus, "We want to make sure that we are involved with that discussion." The company believes that it's important that agents and brokers go back to the basic risk management techniques and make sure that they are in place and working as originally designed. "They need to really go back to square one and make sure that everything fits together."

Now that insureds are starting to have significantly higher operating revenues, that can make a significant impact on such things as labor market tightening, and draw people's attention away from traditional concerns like risk management and potential exposures. Again, he points out, "That's just one small component to the broader risk communication that needs to occur between the agent and broker and the insured."

Mandes states that "agents and brokers must make sure that they are assessing changing risk and using all resources that are available to them to make certain the insured is properly covered. Travelers has made sure that we help to provide those resources and assist the broker and insured in making the right decisions for their long-term risk." He points out that "one of our long-term goals is to help put wisdom to work." While capital is an important part of an insurance company's underpinnings, "it's really market intelligence and its people that are the most important. We want to be able to leverage our wisdom and provide those resources to the insureds and their agents and brokers."

   

 

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