Pilot Scale Manufacturing Insurance: What It Covers, Who Needs It, and How to Get the Right Policy

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Pilot Scale Manufacturing Insurance: What It Covers, Who Needs It, and How to Get the Right Policy

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Pilot Scale Manufacturing Insurance: What It Covers, Who Needs It, and How to Get the Right Policy

Pilot scale manufacturing sits in the awkward middle ground between R&D and full production. You’re no longer “just testing” in a lab, but you’re not yet operating at stable, high-volume output. That in-between stage creates unique risks: prototypes become sellable products, temporary processes become semi-permanent, and small teams start handling higher values of stock, equipment, and liability.

This guide explains what pilot scale manufacturing insurance is, who needs it, what it typically covers, and how to build a policy that matches your real-world risks.

What is pilot scale manufacturing?

Pilot scale manufacturing is the stage where a business proves a product and process at a larger scale than the lab, but before committing to full commercial production. It often includes:

  • Small-batch production runs

  • Process validation and optimisation

  • Trial packaging and labelling

  • Limited distribution to early customers

  • Testing different raw materials or suppliers

  • Temporary or shared facilities (incubators, rented units, contract manufacturing sites)

Pilot scale is common in pharmaceuticals, biotech, medical devices, chemicals, food and drink, cosmetics, electronics, and advanced materials.

Why pilot scale manufacturing is riskier than it looks

Many businesses assume they can rely on “general business insurance” during pilot scale. The problem is that pilot operations combine risks from multiple worlds:

  • R&D risks (experimentation, changing processes, uncertain outcomes)

  • Manufacturing risks (machinery, fire, contamination, product defects)

  • Commercial risks (contracts, deliveries, customer injury or property damage)

  • Regulatory risks (traceability, labelling, quality systems)

Even if you’re producing small volumes, a single incident can be expensive: a batch recall, a contamination event, a fire in a rented unit, or a claim from a customer who relied on your pilot product.

Who needs pilot scale manufacturing insurance?

If any of the following apply, you should treat insurance as a core part of your pilot plan:

  • You produce or package products for sale (even limited release)

  • You use specialist equipment (reactors, mixers, filling lines, CNC, 3D printers, cleanroom equipment)

  • You store raw materials, chemicals, or temperature-controlled stock

  • You work in a leased unit or shared facility with strict landlord requirements

  • You have contracts with customers, distributors, or research partners

  • You supply regulated or safety-critical products (pharma, medical devices, food, chemicals)

  • You use contractors, interns, or temporary staff

  • You attend trade shows, demos, or customer trials

Core covers to consider for pilot scale manufacturing

Insurance should be built around your actual exposures. Below are the most common covers pilot scale manufacturers need.

1) Public liability insurance

Public liability covers claims if your business activities cause injury to a third party or damage their property.

Examples:

  • A visitor slips in your pilot unit and is injured

  • You damage a landlord’s property during installation of equipment

  • A contractor’s tools are damaged due to your negligence

Pilot scale operations often involve frequent site changes, temporary setups, and visitors (investors, auditors, partners), which can increase the likelihood of incidents.

2) Product liability insurance

Product liability covers injury or property damage caused by products you manufacture, supply, or distribute.

Examples:

  • A cosmetic product causes a skin reaction and a customer claims damages

  • A chemical sample leaks during transport and damages a customer’s equipment

  • A food product triggers an allergen claim due to incorrect labelling

Even if you label products as “pilot” or “trial,” you can still face liability if someone is harmed.

3) Employers’ liability insurance (UK legal requirement)

If you employ staff in the UK (including many casual, temporary, and some contractor arrangements), employers’ liability is usually required by law.

It covers claims from employees who are injured or become ill due to their work.

Pilot scale risks include:

  • Manual handling injuries

  • Exposure to fumes, dust, solvents, or biological agents

  • Burns, cuts, or crush injuries from equipment

  • Stress and fatigue during intense trial periods

4) Property insurance (buildings, contents, stock)

Even in pilot scale, your equipment and materials can be high value. Property cover can include:

  • Contents (equipment, tools, office kit)

  • Stock (raw materials, WIP, finished goods)

  • Tenant’s improvements (fit-out, racking, extraction, cleanroom panels)

Key perils include fire, flood, theft, escape of water, and accidental damage.

If you’re in a shared facility, check what the landlord covers versus what you must insure.

5) Business interruption insurance

Business interruption (BI) helps replace lost gross profit and covers certain ongoing costs if you can’t operate due to an insured event (like a fire).

For pilot scale, BI can be crucial because:

  • You may have investor milestones tied to production

  • A delayed validation run can push back regulatory submissions

  • A missed customer trial can lose a key contract

BI can also be structured to cover increased cost of working, such as renting temporary equipment or moving to a new unit.

6) Equipment breakdown (engineering) insurance

Pilot scale often relies on a small number of critical machines. If one fails, you may lose weeks.

Equipment breakdown can cover:

  • Sudden mechanical or electrical failure

  • Damage to boilers, pressure vessels, refrigeration, compressors

  • Repair or replacement costs

  • Sometimes associated business interruption

This is especially relevant for temperature-controlled products, cleanroom operations, and any process involving pressure or heat.

7) Goods in transit and cargo cover

If you ship samples, pilot batches, or high-value components, goods in transit cover can protect against loss or damage while being transported.

Common pilot scale issues include:

  • Temperature excursions

  • Packaging failures

  • Courier mishandling

  • Theft from vehicles

If you export, you may need additional cargo cover and clear contract terms (Incoterms).

8) Product recall and contamination cover

If you’re producing consumables or regulated products, recall cover can be a lifesaver.

It can help with:

  • Customer notification

  • Collection and disposal

  • Testing and investigation

  • PR and crisis management

For food, drink, cosmetics, and supplements, contamination and tamper cover may also be relevant.

9) Professional indemnity (PI) insurance

Pilot scale manufacturers often provide advice, design input, formulation work, or process development services.

PI covers claims arising from professional negligence, errors, or omissions.

Examples:

  • You advise a partner on process parameters and their batch fails

  • Your specification document contains an error causing losses

  • You provide testing results that a customer relies on

If you’re “making and advising,” you may need both product liability and PI.

10) Cyber insurance

Pilot scale businesses can be surprisingly exposed to cyber risk:

  • IP and formula/process data stored in cloud tools

  • Supplier portals and customer data

  • Payment systems and invoicing

  • Operational tech connected to networks

Cyber cover can help with breach response, ransomware, business interruption, and liability.

Common exclusions and gaps to watch for

Pilot scale is where insurance gaps show up. Watch for:

  • “Prototype” or “experimental” product exclusions

  • Hazardous materials exclusions (solvents, flammables, corrosives)

  • Temperature control exclusions for chilled/frozen goods

  • Contractual liability limits (your contract may demand higher limits than your policy)

  • Work away / offsite work restrictions

  • Territorial limits (UK-only vs worldwide exports)

  • Claims-made vs occurrence wording (especially for PI)

A good broker will help align policy wording with what you’re actually doing.

How to build the right policy for your pilot operation

Underwriters will price and structure cover based on your risk profile. The fastest way to get good terms is to present your pilot operation clearly.

Step 1: Describe your process and materials

Be ready to explain:

  • What you make (and whether it’s sold or only sampled)

  • Batch sizes and annual turnover projections

  • Key raw materials and any hazardous substances

  • Temperature requirements and shelf life

  • Waste handling and disposal

Step 2: Explain your quality and traceability controls

Even at pilot scale, insurers like to see:

  • Batch records and lot traceability

  • Supplier approval processes

  • Labelling checks (especially allergens)

  • Testing and release procedures

  • Complaint handling and incident logs

Step 3: Map your sites and responsibilities

Pilot scale often involves multiple locations:

  • Your own unit n- Shared incubator space

  • Contract manufacturer site

  • Storage facility

Clarify what you control and what you don’t. If you use a contract manufacturer, you may still be liable as the brand owner.

Step 4: Match limits to worst-case scenarios

Don’t pick limits based only on current turnover. Consider:

  • Maximum foreseeable claim severity

  • Contract requirements

  • The cost of a recall

  • The value of equipment and stock at peak

Step 5: Decide on add-ons that protect milestones

Pilot scale is milestone-driven. Consider covers that protect timelines:

  • Equipment breakdown + BI

  • Goods in transit + temperature extension

  • Recall/contamination

  • Cyber

Typical insurance requirements from landlords, customers, and investors

Pilot scale businesses often face “proof of insurance” requests. Common requirements include:

  • Public liability (often £2m–£10m)

  • Product liability (often bundled with public liability)

  • Employers’ liability (£5m minimum is common)

  • Professional indemnity (if you provide design/testing/advice)

  • Evidence of property cover for tenant’s improvements

Always check contracts for:

  • Indemnities

  • Hold harmless clauses

  • Additional insured requirements

  • Waiver of subrogation

If your contract wording is aggressive, it can create uninsured exposures.

Cost factors: what influences the premium?

Insurers typically look at:

  • Industry and product type (food/pharma/chemicals can be higher risk)

  • Hazardous processes (heat, pressure, solvents)

  • Claims history (even if from prior ventures)

  • Turnover and distribution footprint

  • Quality systems and testing

  • Storage conditions and fire protections

  • Experience of the team

  • Use of contract manufacturers

The best way to reduce premium is to reduce uncertainty: show controls, documentation, and a clear plan.

Quick checklist: what to prepare before requesting a quote

  • Company details and trading history

  • Description of products and intended end use

  • Turnover estimates and batch volumes

  • Site addresses and security details n- List of equipment with values

  • Stock values (average and maximum)

  • Any hazardous materials and COSHH controls

  • Quality procedures (even simple SOPs)

  • Contract requirements from customers/landlords

  • Export territories (UK, EU, worldwide)

FAQs: Pilot Scale Manufacturing Insurance

Is pilot scale manufacturing considered “manufacturing” for insurance?

Usually yes, especially if you are producing physical goods, using machinery, or supplying products externally. Even if volumes are small, insurers will typically treat it as manufacturing.

Do I need product liability if I’m only supplying samples?

If samples can be used by third parties, product liability is strongly recommended. The risk is about harm, not sales volume.

What if I use a contract manufacturer?

You can still be liable as the brand owner or designer. You may need product liability and recall cover even if you don’t physically manufacture.

Can I insure prototypes and R&D equipment?

Often yes, but you must describe them accurately. Some policies exclude experimental work unless specifically declared.

What limits should I choose?

This depends on contracts and worst-case exposure. Many UK businesses choose £2m–£10m for liability, but regulated products may justify higher.

Does insurance cover failed batches?

Typically, insurance does not cover “your product didn’t work” or poor workmanship. However, contamination, recall, equipment breakdown, or insured damage events may be covered depending on wording.

Is cyber insurance really necessary at pilot scale?

If you store IP, customer data, or rely on cloud systems, cyber is worth considering. Ransomware can stop production and delay milestones.

Final thoughts

Pilot scale is where promising ideas become real commercial products. It’s also where small mistakes can become expensive claims. The right insurance programme helps you protect people, property, timelines, and reputation—so you can focus on proving the process and scaling with confidence.

If you want a faster quote process, prepare a one-page summary of your products, process, sites, and controls. The clearer your risk story, the better your terms are likely to be.

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Pilot scale manufacturing insurance explained: key covers, common gaps, and how to protect pilot production, equipment, stock, and liability in the UK.

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