How 3D printing will reshape the insurance landscape
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When the term 3D Printing (3DP) is used, it often surprises people to learn that the technology has been around for more than three decades. Only in the last few years has 3DP (also referred to as Additive Manufacturing) caught everyone's attention as a rapidly developing and exciting technology.
Its rise in popularity can be attributed to several factors. First, the cost of 3D printers for home use has become increasingly affordable. In addition, early patents for 3DP have now expired, which has led to the more widespread use of 3DP in industrial applications. Finally, there have been exponential leaps in products and materials innovation1.
The growth of 3DP has had a significant impact on various industries, as well as the re/insurance risk landscape. Rather than detail whether this will lead to the next industrial revolution, we will consider in this article the impact 3DP has had on different industries, and subsequently what this could mean for re/insurance globally.
Application in various industries
Aerospace and automotive industries have been early adopters of 3DP and have been benefiting from rapid prototyping for quite some time. Because prototypes are produced faster, it is possible to shorten production cycles tremendously and allow engineers to experiment with different features of the final product. This often results in lower costs.
Although the aerospace and automotive industries primarily use 3DP for rapid prototyping, the technology is also used to produce end parts. Both Boeing and Airbus are using 3D printed parts in their aircrafts. Formula1 motor racing has also been utilising 3DP for rapid prototyping and improving the performance of parts. In addition, antique car owners can now produce customised automobile parts for their beloved vehicles even when replacement parts are no longer available in the secondary market.
Future applications will depend strongly on material science research and the production of innovative parts based on new designs and embedded functionalities.
Would you like to build a house today and live in it tomorrow? A Chinese company says it can build ten houses a day with 3DP. Additive manufacturing was used to build a villa and a five-story apartment building. Assembling building material layer by layer might not be a novelty as that is how we have been building houses for centuries. However, 3DP enables architects, engineers and designers to use different materials and other computer-assisted design technology not only for prototype work, but also to produce actual construction materials.
The ability to use bionic designs or achieve shapes and forms that were not available before is a big advantage offered by 3DP. Achievement of that 'wow factor' has always been important to designers, as evidenced by some of the newer stadiums, buildings, and bridges. 3DP enables engineers to stay at the cutting edge of design.
A key challenge to make 3DP more viable for construction is the ability to use a wider variety of materials due to the strength and durability required for construction projects. When it comes to 3DP, size does matter. The bigger the scope of the object, the bigger the printer needed to build it.
Standards will be required to govern how we use 3DP in construction. This is particularly important because of the need to demonstrate and verify the strength, durability and ultimately the safety of the structure.
Hunger and nutrition are very complicated social, political and economic issues, but 3DP might provide new opportunities to address these issues. Much of the current buzz about 3DP of food involves novelty items, such as those made from sugar and chocolate. However, the possibilities are much broader, eg the production of customised, highly nutritious meals. Using 3DP for food production might prolong shelf life or allow foods to be customised with appropriate calorie levels. It could also be beneficial to those who have trouble chewing or swallowing. Combine this with wearable technology or devices monitoring the body and the possibilities are quite intriguing. This is especially true for athletes or those with medical conditions who have specific dietary needs.
Developing the technology, however, is only one aspect of bringing 3D printed food to market. The other aspect is ensuring that the machines, processes and finished products meet safety standards. These are developing, although more work is needed. For example, many 3D foods are made with some novel ingredients. They may use some type of paste-like ingredient; this gives them an adhesive quality to stick to the previous layer and to dry or “cook” quickly enough for the finished product to hold its intended shape. Naturally, there is a need to evaluate the safety of these ingredients.
Even though the more advanced and widely used applications of 3DP in food are not yet here, it is an interesting area to explore for the future, as the need to provide adequate food resources on a global basis is a highly relevant topic.
Home Use Application
It is believed that currently there are more than 300 brands of FDM2 machine brands that are suited for home users. These easy to use 3D printers layer some sort of plastic material through the extrusion nozzle and usually produce simple plastic objects such as toy figures, confectionary or accessories. Even though there has been some indications that 3D printers could be in every global household in the future, this has not yet occurred. The US is the primary market for home 3DP applications.
Hewlett Packard confirmed they will enter the 3DP sphere with Multi Jet Fusion technology and other manufacturers seem to be interested in potential expansion to home users3. Moreover, low-end 3D printers foster changing business models from peer-to-peer sharing of STL files and the creation of digital libraries, training centres and 3DP cafes. New developments may lead to potential Intellectual Property rights infringements. Because 3DP technology makes copying objects fast and easy, individuals may not be aware of safety standards and product patent frameworks that could apply.
The medical industry is extensively covered in another article within this Risk Dialogue Magazine. Healthcare is one of the fastest growing industries in 3DP and developments in this sphere are expected to positively affect the safety, affordability and availability of health care.
Regional overview of 3DP
The industry consensus is that 3DP has evolved beyond the hype, prototype and novelty stage and must be recognised as a mainstream technology. There has been enormous investment by leading companies that has probably just begun to unleash the potential of this technology. North America remains the biggest market for 3DP compared to Asia or Europe.
From a product perspective, much attention has been directed toward medical applications. The Food and Drug Administration (FDA) has approved many different types of medical products and has acknowledged 3DP as an important technology. Many other industries – automotive, aerospace, construction, food – are similarly active.
The reinsurance industry continues to assess and understand the changing liability landscape, even though there is no specific federal framework that would apply specifically to 3DP. Specialised insurance forms or wordings are not present (yet) and this exposure remains in the realm of product liability. The key underwriting message is understand and underwrite, not ignore.
From mobile applications to social networking to wearable devices, Asia has frequently been a creator and fast adopter of technological advancements and innovations in the global tech industry. It has been no different when it comes to 3DP and additive manufacturing.
There are strong indicators that the Asia Pacific region will be the dominant market by 2020, as its 3DP industry is forecast to exceed USD 20 billion. Japan was one of the early entrants into 3DP and currently has the largest market share in Asia at approximately 10%. Japan, China and South Korea together account for 21% of the 3DP market. This growth is bolstered by an immense industrial sector.
There are many examples of the rapid rise of the 3DP industry in Asia, and the 3DP applications and products manufactured are as diverse as the region itself. Recently, the largest commercial 3DP facility in Southeast Asia was opened in Singapore. This capitalises on the sharp increase in demand for these services with a focus on the dental, medical and aerospace sectors. Furthermore, one of the largest hospitals in China opened its own 3DP laboratory to provide pre-operation support to surgeons.
A plethora of industry events, exhibitions, and conferences throughout Asia connect manufacturers, suppliers and consumers. Some of the world’s most prominent innovators in rapid prototyping, CAD/CAM software development, 3D laser engraving and other related areas for manufacturing are present. In 2015, India held its inaugural 3DP Conference and Expo.
A key ingredient for the growth of the industry in the Asia Pacific region is that governments in many Asian countries see the lucrative potential of additive manufacturing. To this end, these governments have established progressive policies supporting the industry and market expansion. Coupled with public and private funding into research, development and industry initiatives, there is no question that the Asia Pacific region represents a dynamic marketplace for 3DP.
Europe, the second largest market for 3DP, remains a hub for R&D activities that could potentially provide needed information about product testing, durability and weaknesses that would be beneficial for the re/insurance industry to assess risk. Otherwise, the same EU legal framework that applies to traditional forms of manufacturing would apply to 3DP processes, as there is no overarching 3DP specific regulation on the EU level.
Even though there is a need for further regulation, it is more likely producers and users of this technology will take control over different aspects (eg manufacturing, design, and material development) of 3DP. It is also likely that the rising trend of FinTech and activities in the start-up scene will incentivise the further development in 3DP as the 'killer technology' is still missing.
Even though European Union has funded 3DP projects since the industry's infancy4, there is no overarching standard framework that would apply to 3D printed objects. There has also been no further harmonisation. Germany remains the major market with manufacturers of 3DP systems providing innovative Additive Manufacturing solutions to a variety of industries.
Risks to re/insurance via production cycle
While new technologies often bring important advantages, they also introduce new risks. As risk is the insurance industry's business, the question we consider is which industries will be most affected by 3DP. Once established, we then contemplate any new exposures and examine how this changes the risk landscape. For example, some industries traditionally have relied on large inventories of spare parts and that could change dramatically with the increased utilisation of 3DP.
Some industries require customised items, such as innovative construction parts or architectural designs, medical devices or dental products. At the other end of the spectrum, some industries rely on mass production, such as modular type housing. These needs are all different, yet 3DP offers opportunities for new products, cost savings and better customer service.
In order to assess and understand the possible applications of additive manufacturing and associated exposures, it is important for re/insurers to understand the material and process side of this technology. 3DP encompasses different techniques. Therefore, processes that use, for instance, metal powder sintering, would be substantially different from the ones using Ultra Violet light curing. In order to assess the risk, looking into the production cycle might be useful.
At the product design stage, possible IP rights infringements and professional indemnity exposures could become an issue. Computer aided design (CAD) files become viable, sealable products that can be shared, exchanged and sold. That said, unlike making copies of digital files, the process of producing protected designs from scans or CAD files is still not as fast and smooth in all instances. However, software is improving rapidly and will make this method more efficient.
Counterfeit products are one of the more plausible threats, as it is not difficult to print such plastic objects as designer glasses, toy figures, models and other plastic artefacts. However, many CAD designs for 3DP available on the internet now are useful objects that would not be protected by IP regulations. Besides, some insurance policies deal with this exposure by excluding patent infringements. As with any new technology, 3DP is likely to undergo a more scrutinised risk assessment in, eg construction projects. Also, the risk taking bias of the owner or the insurer might be affected. Indirect exposures might also come from cyber risk and techno E&O covers due to possible file manipulation and because it involves large data use and processing.
The construction/production stage might result in the manufacture of illegal or dangerous objects, for example guns or armory. In May 2013, Cody Wilson uploaded videos about the first fully 3D printed gun called The Liberator. Production of spare parts that are not tested, but mimic the design of original objects might pose issues as hobbyist makers might not be familiar with the standard of care, safety and quality requirements that established manufacturers would know. To illustrate this point, one could make a plastic lampshade at home; however, what happens if the material properties of the plastic used are not the same as those of the original manufacturer and the shade melts or subsequently causes a fire. The material features of an object might be questioned, especially when considering objects that would require durability.
Moreover, combining 3DP with other processes might increase operational hazards. Where this technology is used extensively and relied on, underwriters should understand potential accumulation scenarios and the vulnerabilities of machines. Some of the printers are more sensitive to vibration and environment in which they are operated. Although the 3DP industry is still rather small, it concentrates around a couple of big manufacturers and service providers, which might rely on certain filament providers.
Considering that written and verbal instructions can form part of a product, another question is whether the producer provides sufficient instructions to the user. Is there sufficient disclosure of information about the material used, durability of the object, and product features? Manufacturer disclaimers are said to be some of most important tools in order to defend potential claims when they arise. Therefore, the use of sensible disclaimers is an important feature to mitigate risk.
Understanding product distribution channels is important. 3DP offers an opportunity to create new business models. On one hand, some distribution channels might be cut off if supply chains are simplified and there is the possibility to print 'on site'. On the other hand, this could mean a different apportioning of liabilities. For example, consider logistic companies that use 3D printers in the experimental stage on their ships and platforms. Although production costs are likely to be higher using a 3D printer, the instant availability of a spare part, printed on board from the blueprint sent by the supplier while in the middle of an ocean, has obvious benefits. 3DP would remove the costs of the warehouse, packing, airfreight, and customs clearance. One could avoid having to charter a ship to deliver the part as well as save time.
A manufacturer owes a duty of care in monitoring how the product is performing. With products that are expected to have a long life cycle, it is important to see how the product is changing over time. It may not be possible to monitor the performance of a product in case of a 'democratisation' of production – ie the product could be printed by a variety of different producers and is hard to track. This adds a new level of complexity to product liability exposures.
Although disposal and recycling seem not to pose particular difficulties at this point in time, it might raise issues in case of the use of untested or toxic materials.
In a nutshell, from a re/insurance perspective, perhaps the biggest uncertainty is the long-term durability of the product. We know quite well what to expect in terms of performance for products manufactured by traditional methods. Products made with 3D printers are certainly subject to various types of testing, but only time will tell how well they will perform in real life applications. This is especially important for products used in critical safety applications. 3DP might also challenge the lines between product and service; if different parties are involved in the supply chain, the liability landscapes may shift. And while it looks like underwriters will need to ask more questions, the re/insurance industry will need to test which questions are the most appropriate and relevant to ask.
Traceability and attribution of liability is another issue. 3DP might help simplify supply chains by bringing manufacturing in house rather than outsourcing it. However, 3DP processes blur the lines between design and production, modification and post processing. Attribution of liabilities might not be the same as with traditional manufacturing processes. Pollution is another topic that is often raised. The use of plastic materials may increase, along with the potential hazards of fumes, powders or nanoparticles. Long term, 3DP could perhaps have a positive effect on the environment as it significantly reduces waste in the manufacturing process.
A successful collaboration between underwriting, risk engineering services and claims is essential. An important issue is the development of standards that will apply some degree of consistency with regard to production control methods.
Cyber, a rapidly emerging topic, also has an impact on 3DP. One of the unique challenges is controlling access to the original design and process software. To some degree, modification is expected so one can produce different types of products. This is one of the fundamental attributes of this technology. That said, one needs to make sure only legitimate modifications are allowed.
Swiss Re acknowledges 3DP as a new and exciting technology that has significant positive implications for various industries. Thus, we are closely monitoring developments in 3DP to effectively:
Share our expertise with our clients and partners;
Collaboratively assess market opportunities and threats together, and
Strategically advise on future developments and trends.
The primary insurance market is already covering these risks either unknowingly or specifically identifying that the use of 3DP would fall within the regular operations of the insured. Assessing re/insurance wordings is one key area that industry needs to focus on as it embraces this technology.
Navigating the new risk landscape that 3DP presents to re/insurers will be a challenge, but it is one that the industry has consistently done throughout history. As with any innovation involving products, processes or operations, it is the well-informed and prepared re/insurer that will not only successfully manage this new technology, but also benefit from the opportunities that are presented.
1. Chuck Hull patented 3D printing system in 1986
2. Fused Deposition Modelling
4. Examples include Horizon 2020 programme
Casualty Treaty Underwriter, Swiss Re
Ruta Mikiskaite is a Casualty Treaty Underwriter in the Swiss Re UK office. With previous primary insurance experience, she enrolled in Swiss Re's graduate programme in 2013 initially in Munich, before completing a rotation in Zurich and joining the underwriting team in London. Trained as a lawyer, Ruta is currently underwriting UK&Irish business. She leads the 3D printing workstream in Casualty and is acquiring expertise in other Casualty re/insurance topics.
Senior Casualty Treaty Underwriter, Swiss Re
Robert Weireter is a Senior Underwriter for Treaty Casualty at Swiss Re in Armonk, NY. He specializes in environmental, energy and construction liability as well as emerging risks. His experience includes 12 years in consulting environmental and engineering and almost 20 years in (re)insurance. He has a Bachelor of Science degree in Natural Resources Planning, a Master of Science degree in Environmental Science and an Master of Business Administration in Management & Finance.
Senior Casualty Treaty Underwriter, Swiss Re
Nick Sordon has been an insurance professional for 21 years and is currently a Senior Casualty Treaty Underwriter with Swiss Re.
Prior to joining Swiss Re, Nick worked for a number of direct insurance companies including some years in the field as a Senior Risk Surveyor specialising in Liability. This involved conducting field assessments of client's businesses, which provided him with an enhanced insight into risk identification and exposure analysis.
He has been an author, presenter and active discussion partner with clients on a range of emerging risks topics including Nanotechnology, 3D Printing, Cyber Risk and Drone Technology.