Research-Based Manufacturing Insurance (UK): A Practical Guide for Manufacturers

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Research-Based Manufacturing Insurance (UK): A Practical Guide for Manufacturers

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Research-Based Manufacturing Insurance (UK): A Practical Guide for Manufacturers

What “research-based manufacturing” actually means (and why insurers treat it differently)

Research-based manufacturing sits between R&D and full-scale production. You might be:

  • Manufacturing prototypes or pilot batches

  • Producing regulated or high-spec components (medical, aerospace, electronics)

  • Iterating designs while fulfilling customer orders

  • Using novel materials, processes, or software-controlled equipment

From an insurance perspective, that mix creates a unique risk profile: higher uncertainty, tighter tolerances, more change, and often higher downstream impact if something fails.

The biggest risks in research-based manufacturing

Insurers typically assess your operation across a few core risk buckets. Understanding these helps you buy the right cover (and avoid nasty exclusions).

1) Product failure and downstream losses

When you manufacture innovative or high-precision products, a defect can cause:

  • Customer property damage

  • Bodily injury

  • Recall and replacement costs

  • Contractual penalties

  • Business interruption for your customer (which may come back to you via claims)

Even if you’re “only” making components, your part can be the weak link.

2) Prototype and pilot-run uncertainty

Pilot batches often involve:

  • Unproven processes

  • Frequent design changes

  • Limited test data

  • Manual interventions

That increases the chance of scrap, rework, and quality escapes.

3) IP, confidentiality, and data risk

Research-based manufacturers frequently handle:

  • Customer designs and proprietary specs

  • Sensitive test results

  • CAD files, firmware, and process parameters

A cyber incident or accidental disclosure can trigger contractual claims, regulatory issues, and reputational damage.

4) Equipment breakdown and process interruption

Specialist kit (CNC, cleanroom equipment, 3D printers, lasers, test rigs) can be:

  • Expensive to repair

  • Hard to replace quickly

  • Dependent on specialist engineers

A single breakdown can halt production and delay customer deliverables.

5) Regulatory and compliance exposure

Depending on your sector, you may face:

  • Product safety obligations

  • Quality management standards (e.g., ISO 9001/13485)

  • Traceability and documentation requirements

  • Environmental and waste controls

Non-compliance can increase claim severity and complicate defence.

6) Contractual risk (the silent killer)

R&D-heavy manufacturing contracts often include:

  • Broad indemnities

  • Fitness-for-purpose clauses

  • Liquidated damages n- “Consequential loss” wording that isn’t always excluded

Insurance is designed around negligence-based liability. Contract terms can expand your exposure beyond what a standard policy automatically covers.

Core insurance policies for research-based manufacturers

Below are the covers most UK research-based manufacturers should consider. The right mix depends on your processes, turnover, contracts, and sector.

1) Employers’ Liability (EL) – legally required

If you employ staff, EL is mandatory in the UK (with limited exceptions). It protects you if an employee is injured or becomes ill due to work.

Key considerations:

  • Manual handling and repetitive strain

  • Exposure to fumes, dust, chemicals, resins, solder, or solvents

  • Use of machinery, robotics, and high-voltage equipment

2) Public Liability (PL) – for third-party injury or property damage

PL covers claims from third parties (visitors, clients, landlords) for injury or property damage arising from your business activities.

For manufacturers, PL is often paired with Product Liability.

3) Product Liability – essential if anything you make leaves your site

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

Common pitfalls:

  • Products used in safety-critical environments

  • Overseas exports (jurisdiction matters)

  • “Design and manufacture” responsibility (not just build-to-print)

If you provide design input, you may also need Professional Indemnity.

4) Professional Indemnity (PI) – when your expertise is part of the product

Research-based manufacturers often provide:

  • Design services

  • Engineering advice

  • Testing, certification support, or specifications

  • Process development and consultancy

PI covers financial loss caused by negligent advice, design errors, or professional services.

Watch-outs:

  • Contractual liability extensions

  • Fitness-for-purpose clauses

  • “Failure to meet performance” allegations

5) Property insurance – buildings, contents, stock, and specialist equipment

Property cover protects your physical assets against perils like fire, flood, theft, and escape of water.

For research-based manufacturing, you’ll want to think beyond “contents”:

  • Prototype stock (often irreplaceable)

  • Customer-supplied materials

  • Tools, jigs, moulds, and dies

  • High-value test equipment

Make sure sums insured reflect replacement cost, not book value.

6) Business Interruption (BI) – protects cashflow when you can’t trade

BI covers loss of gross profit and ongoing expenses after an insured event (like a fire) disrupts operations.

Research-based manufacturers should pay attention to:

  • Indemnity period (often needs 12–24 months)

  • Dependency on specialist machinery

  • Long lead times for replacement parts

  • Critical supplier and customer extensions

7) Engineering / Machinery Breakdown – for sudden mechanical or electrical failure

This is often separate from standard property cover.

It can cover:

  • Breakdown repair costs

  • Damage caused by the breakdown

  • Optional BI from breakdown (very relevant)

If one machine is the bottleneck for your entire process, this cover is usually high value.

8) Cyber insurance – because manufacturing is now a data business

Cyber insurance can help with:

  • Ransomware and business interruption

  • Data breach response

  • Liability for confidential information

  • System restoration and incident response n For research-based manufacturing, cyber is also about protecting IP and maintaining production continuity.

9) Environmental / Pollution Liability – if your processes create exposure

If you store or use chemicals, oils, coolants, resins, or generate hazardous waste, consider pollution cover.

Standard PL policies often have limited pollution cover (usually sudden and accidental only). If you need broader protection, specialist environmental liability may be appropriate.

10) Goods in Transit and Marine Cargo – for components and prototypes on the move

If you ship:

  • High-value components

  • Temperature-sensitive items

  • Prototypes

Transit cover can protect against loss or damage while goods are being transported.

Specialist covers that can matter a lot

Depending on what you make, these can be the difference between “covered” and “not covered.”

Product recall / contamination / rectification

If a defect is discovered, you may need to:

  • Notify customers

  • Retrieve products

  • Replace or rework stock

  • Manage PR and regulatory reporting

Standard Product Liability may not pay for your own recall costs unless you add a recall/rectification extension.

Tooling and customers’ property

Many research-based manufacturers hold:

  • Customer-owned tools and moulds

  • Customer materials and components

  • Items on test or calibration

Make sure your property policy includes “customers’ goods” and “property in your care, custody, or control.”

Contract works / installation

If you install equipment or carry out work at client sites, you may need contract works cover.

Directors’ & Officers’ (D&O)

If you have investors, a board, or significant regulatory exposure, D&O can protect directors personally against certain management liability claims.

How insurers underwrite research-based manufacturing (what they’ll ask)

To get competitive terms, be ready to explain your operation clearly. Underwriters typically want:

  • What you manufacture (and end-use)

  • Turnover split by product line and territory (UK/EU/USA/Worldwide)

  • Any design responsibility (build-to-print vs design-and-build)

  • Quality controls (inspection, batch testing, traceability)

  • Certifications (ISO, sector standards)

  • Claims history and near-miss data

  • Contracts and key liability clauses

  • Fire protections (alarms, sprinklers, hot works controls)

  • Cyber controls (MFA, backups, patching)

If your products are used in high-hazard sectors, expect deeper questions.

Common exclusions and gaps to watch for

This is where research-based manufacturers get caught out.

“Prototype” and “experimental” wording

Some policies restrict cover for experimental products or untested designs. If you make prototypes, be explicit and get confirmation in writing.

Contractual liability

If you accept liability beyond negligence (e.g., liquidated damages, broad indemnities), your policy may not respond.

Fitness for purpose

A fitness-for-purpose obligation can create strict liability. Many PI policies exclude this unless negotiated.

Recall and rectification

Product Liability often covers third-party damage, not the cost to fix your own work or recall products.

USA/Canada jurisdiction

Supplying into the USA/Canada can change pricing and cover terms significantly. If you export, make sure territories are correct.

Intellectual property disputes

Cyber and PI policies may help with some aspects, but pure IP infringement is often excluded or limited.

Practical risk management steps that reduce premiums (and claims)

Insurers love evidence of control. A few high-impact steps:

  • Documented quality management system (even if not certified)

  • Clear change control for designs and process parameters

  • Batch traceability and retention samples where appropriate

  • Supplier vetting and incoming inspection

  • Preventative maintenance schedules for key machinery

  • Fire risk assessment, housekeeping, and hot works permits

  • Segregated storage for flammables and lithium batteries

  • Cyber basics: MFA, least-privilege access, offline backups, incident plan

  • Contract review process (especially limitation of liability clauses)

Choosing limits and structuring your programme

There’s no one-size-fits-all, but here’s a sensible way to think about it.

Liability limits

Consider:

  • Worst-case injury/property damage scenario

  • Customer requirements (many contracts specify minimum limits)

  • Sector expectations (medical/aerospace often higher)

PI limits

Base this on:

  • Size of contracts

  • Potential cost of redesign/rework

  • Downstream financial loss exposure

BI indemnity period

If replacing a specialist machine takes 9–12 months, a 12-month BI period may be tight. Many manufacturers choose 18–24 months.

Excesses

Higher excesses can reduce premium, but don’t set them so high that small incidents become cashflow shocks.

Claims examples (realistic scenarios)

To make this more tangible, here are a few typical claim patterns.

  1. Prototype component failure: A batch of prototype parts fails under load testing at a customer site, damaging their test rig. Product Liability may respond to property damage; recall/rectification may be needed for your own replacement costs.

  2. Design input dispute: You suggest a material change to improve performance, but the product later fails in service. The customer alleges negligent advice and claims for financial loss. PI is the key cover.

  3. Machine breakdown: A critical CNC spindle fails. Engineering breakdown covers repair; BI from breakdown covers lost gross profit while you’re down.

  4. Ransomware: Systems are encrypted, production scheduling and CNC programmes are inaccessible, and you miss delivery dates. Cyber can cover incident response and BI (subject to terms).

How to get the right quote (and avoid delays)

If you want fast, accurate terms, prepare:

  • A short description of products and end-use

  • Turnover, payroll, and headcount

  • Locations and building details

  • Values for stock, plant, and equipment

  • Top 5 customers and any contract requirements

  • Claims history (even if nil)

  • Export split and territories

  • Any hazardous processes (heat, chemicals, dust)

The clearer you are, the less “assumption pricing” you’ll face.

Final thoughts

Research-based manufacturing is exciting—but it’s also complex. The right insurance programme protects your people, your premises, your innovation, and your balance sheet. The key is aligning cover with how you actually operate: prototypes, design input, specialist kit, and high-consequence products.

If you’re unsure where your biggest exposure sits—product liability, PI, cyber, or business interruption—start with your contracts and your process bottlenecks. That’s usually where the real risk lives.

Need help arranging research-based manufacturing insurance?Call 0330 127 2333 or visit https://www.insure24.co.uk/ to request a quote and talk through the right cover for your operation.

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