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Why Insurance Costs Vary So Widely in Precision Engineering
Precision engineering insurance costs can vary dramatically between businesses that appear similar on the surface. Two CNC workshops with the same turnover can see very different premiums depending on machinery values, downtime exposure, contract terms and quality controls.
Insurers price risk based on severity (how bad a loss could be) and frequency (how often losses may occur). This guide explains the main cost drivers and how to estimate — and influence — your premium.
Key Factors That Determine Insurance Cost
Machinery, Assets & Values at Risk
- Total reinstatement value of CNC machines and plant
- Age, complexity and automation level
- Single points of failure in production
- Availability and lead times for replacement parts
- Tooling, jigs and customer-owned equipment
Higher values and specialist equipment increase both property and machinery breakdown premiums.
Turnover, Contracts & End Use
- Annual turnover and growth projections
- Export territories (UK, EU, USA, worldwide)
- Critical end-use (aerospace, automotive, medical)
- Contractual penalties and quality clauses
- Customer dependency and concentration risk
Safety-critical and export-heavy operations attract higher liability pricing.
Business Interruption: The Hidden Cost Driver
Business interruption (BI) is often the largest part of a manufacturing claim, and a major driver of premium.
How Insurers Calculate BI Exposure
- Annual gross profit (turnover minus variable costs)
- Indemnity period (12, 18, 24+ months)
- Dependency on specific machines or processes
- Ability to outsource or subcontract work
- Historical downtime and recovery experience
Typical BI Cost Impact
Extending an indemnity period from 12 to 24 months can materially increase premium — but underinsuring BI is one of the most expensive mistakes manufacturers make.
- Short indemnity = lower premium, higher risk
- Longer indemnity = higher premium, realistic recovery
- Machinery BI extensions increase cost further
Controls That Reduce Premiums
Insurers actively price quality, maintenance and governance. Strong controls can materially reduce premiums and improve cover.
Engineering & Operational Controls
- Planned maintenance and service records
- Machine guarding and safety systems
- First-off inspection and SPC processes
- Calibration schedules and traceability
- Documented downtime and contingency plans
Management & Contract Controls
- Contract review and liability caps
- Clear acceptance criteria and deviation controls
- Cyber and OT security measures
- Claims history management
- Regular insurance reviews as the business grows
Indicative Cost Ranges (Illustrative Only)
While every business is different, the following examples help illustrate how insurance costs are built up:
- Small CNC workshop (£500k turnover): from low four figures
- Mid-size precision manufacturer (£3–5m turnover): mid four to low five figures
- Exporting / safety-critical supplier: higher five figures+
Actual pricing depends on disclosure, controls, insurers and market conditions.
FREQUENTLY ASKED QUESTIONS
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What is the biggest driver of insurance cost?
For most precision engineering firms, business interruption exposure
and machinery values are the biggest cost drivers.
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Does a claims history increase premiums?
Yes. Frequency and severity of past claims directly affect pricing,
deductibles and insurer appetite.
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Can premiums be reduced without cutting cover?
Often yes. Improving controls, adjusting deductibles, and presenting
risks clearly to underwriters can reduce cost without creating gaps.
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How can Insure24 help?
Insure24 helps you model exposure, present risk clearly, and structure
insurance programmes that balance cost, cover and real-world recovery.