Sponsored: Engle Martin & Associates

Manage Heavy Equipment Fire Risk to Reduce Costly Claims

Not investing in a good fire suppression system exposes equipment owners to numerous fire hazards, which can wipe out valuable heavy equipment.
By: | May 15, 2018 • 6 min read

Fighting something as swift and unpredictable as fire may seem like a losing battle, and indeed, fire is the second leading cause of loss for industries reliant on heavy equipment like mining, construction, marine cargo, logging and agriculture.

Heavy machinery relies on diesel fuel and/or hydraulic oil – liquids highly flammable under pressure — and in some cases process combustible material like wood chips, corn husks or other dried plant material. Together, they create a recipe for fast-moving flames.

To make matters worse, these machines tend to operate in areas not easily accessible by fire departments.

“Logging and agricultural equipment provide good examples of machinery operating in remote areas. There may not be any real roads leading to where the machine is, which impacts response time for the fire department,” said Blair Bennett, Senior Executive General Adjuster with Engle Martin & Associates, a national independent loss adjusting and claims management firm. “I’ve seen countless claims where the equipment is totally burnt to the ground by the time the fire department is able to get there.”

Tractors, excavators, boring machines and the like are expensive tools to replace. Heavy machinery typically comes equipped with hand-held extinguishers, but in most cases it’s too little too late. By the time an operator discovers there’s a problem, the small extinguisher is likely no match for a growing fire fed by the machine’s heat.

“There are specific types of fire, and each calls for a specific type of suppression,” Bennett said. The ability to distinguish classes of fire and deploy the proper solution can be the difference between a total loss and a minor repair.

Type of Fire Determines the Suppressant Needed

Blair Bennett, Senior Executive General Adjuster

The National Fire Protective Association categorizes fires as Class A, Class B or Class C, depending on what caused the combustion and what feeds the flame.

Class A fires are usually started from an accumulation of debris like insulation, upholstery or paper waste in tight areas of the equipment. If the material gets too close to a heat source, it can quickly ignite.

“This type of fire is very susceptible to heavy equipment working in the logging, agricultural and waste management industries,” Bennett said.

Class B fires involve diesel fuel, gas, grease or hydraulic oil. Hydraulic oil and diesel fuel on their own may not be very flammable, but can ignite easily under pressure and in the presence of another accelerant like gas. “These are what we call accelerator-driven fires,” Bennett said. “Hydraulic oils can operate between two and 10,000 pounds per square inch. A lot of these machines use as many metal lines as possible for high pressure hydraulic systems. Due to the nature of machines, their movements and how they work, there are still many areas of pressure that need to be considered,” he said.

Class C fires are electrical fires. Heavy equipment is heavily wired, and those wires are subject to some rough environments with vibrations, extreme temperatures and debris. Wiring can easily come loose, and just a small amount of friction against a metal component can send sparks flying.

The class of fire dictates what type of suppressant will be most effective. The two most common systems are single and dual fire suppression.

A single system uses only one type of suppression agent that may be a powder or a liquid. They tend to be cheaper to produce and install and are suitable for Class A fires without an accelerant.

A dual system utilizes tanks that suppress with both liquid and dry chemical agents, which is useful for Class B fires. The dry suppressant will extinguish the flames, while the liquid component cools down the heat source.

“If you don’t address the heat source, the fire will re-flash and return. In order to attack the fire from both angles, you need to put the fire out from the hydraulic fuel and also be able to cool down the components that can reignite, such as the heater, muffler or any moving parts that have generated frictional heat,” Bennett said.

Class C, or electrical fires, require a special type of pattern extinguisher that can illuminate the fire and spray suppression materials more strategically to avoid causing more damage or shorting.

“One thing to keep in mind is that both Class A combustion and Class C combustion can also turn into a Class B combustion if the flames travel to a hydraulic or fuel line,” Bennet said. “Therefore, a sophisticated suppression system is the best way to extinguish a fire quickly.”

Weighing the Cost and Benefits of Suppression Systems

Despite the effectiveness of fire suppression solutions, cost remains a barrier. Suppression systems generally do not come factory-installed, and operators wishing to implement such a system must have one custom-built for each particular machine.

“Each system has to be custom-designed based on the location of the heat source. It would entail detectors in various areas, multiple lengths of tubing and different locations for nozzles,” Bennett said. “I think in the future we will see more companies either having their own proprietary system or offering factory installation of the equipment.”

The systems can range from a few thousand dollars to well over $10,000 depending on how many tubes and nozzles are needed and the size of the tanks containing the fire suppressants. Vehicle owners and operators must decide whether that investment is worthwhile.

“If a company has a wheel loader valued at $50,000, it might not make sense to put $10,000 worth of improvements on it,” Bennett said. “But from an underwriting standpoint, fire suppression systems would be a way to reduce risk and lower premiums.”

Rely on Industry Expertise

Luckily, there are other simpler and less expensive ways to mitigate fire risk.

“A lot of heavy equipment fires can be eliminated with daily maintenance and cleaning. A responsible company will inspect each machine every day to ensure they are clear of combustible debris and that there are no leaking fuel lines or frayed wires,” Bennett said.

A skilled adjuster can help operators identify possible fire hazards not always obvious at first glance. A hole may not be visible, but often a gray or discolored hose indicates something is off. Belly pans that protect the engine and transmission should be kept clear — even a small buildup of waste can serve as kindling. For companies that do choose to install a fire suppression system, bi-annual inspections are necessary to keep them in top order.

“Operator education is also critical,” Bennett said. “In addition to proper inspections, operators should be trained in how to respond to a fire. Knowing what steps to take to protect yourself and the machine can minimize the damage.”

With experience in both marine and commercial property insurance, Engle Martin’s Specialty Marine & Transportation group can identify areas where an equipment owner is most exposed, either due to coverage gaps created by exclusions, or due to poor loss histories that limit their coverage options.

“We can handle anything from full adjustments involving complex claims to basic appraisals,” Bennett said.

To learn more, visit https://www.englemartin.com/loss-adjusting/inland-marine/.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Engle Martin & Associates. The editorial staff of Risk & Insurance had no role in its preparation.




Atlanta-based Engle Martin & Associates is a leading national independent loss adjusting and claims management provider. Privately held and owner operated, the firm delivers a comprehensive line of property and casualty claims service offerings.

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.