Life Sciences and Biomedical Insurance
Organisations working in the life sciences industry perform vital, highly specialised tasks. The work of some organisations in the industry—such as biomedical companies discovering and testing new drugs—takes years to come to fruition. Biomedical companies typically spend more than 12 years and £1 billion to bring a life-saving drug to market.
Life sciences companies create essential, specific products with perilous paths to market. Manufacturing such highly specialised products requires equally specialised insurance to protect your business from the unique threats to the life sciences industry—most of which are not covered under typical commercial policies. To ensure your business has comprehensive insurance protection that covers your industry’s special risks, read this overview of a common life sciences and biomedical insurance policy.
The Life Science insurance you need
Because the life sciences industry encompasses such a diverse range of organisations, most insurers offer life sciences and biomedical insurance as a bespoke policy. Insurers will usually help customers craft a bespoke policy that suits their needs by offering a wide variety of main covers, including the following:
- Public liability: Public liability covers your legal liability for injury to third parties and damage to their property resulting from your business’ operations.
- Products and services liability: This cover indemnifies your business against its legal liability for injury or damage arising from its products or services. As a company that helps develop and test products for the public, this cover is essential.
- Employers’ liability: If you have any employees, you must purchase employers’ liability cover (unless you fall within very limited exceptions), which covers your legal liability for employee injuries on-site.
- Property damage: Property damage can cover your buildings and contents against accidental damage including theft. Depending on your business, this cover may be essential. For example, if you are developing a controversial drug or other product, you may be a prime target for ideologically or financially motivated thieves.
- Clinical trials: This cover may also be essential for many life sciences and biomedical organisations. Clinical trials cover shields you against your legal liability for injury to research subjects and damage to their property. Because clinical trials can be long, drawn-out affairs with sometimes unexpected results, clinical trial cover can help avoid awful surprises and provide peace of mind.
- Business interruption: Most businesses in the life sciences industry must contend with protracted development periods before their products ever make it to market. During these development periods, businesses are extremely vulnerable to any obstacle that has the potential to halt operations. Business interruption cover grants protection for issues such as loss of revenue due to an interruption to your business’ operations.
- Research and development (R&D) expenditure: It is generally accepted that R&D makes no immediate, direct contribution to a company’s turnover. R&D can eventually contribute to a company’s turnover by producing a viable product, but that all depends on the success of the long and unpredictable R&D phase. R&D expenditure cover provides for the cost of reworking tests or experiments following an insured hazard that destroyed research and impeded your progress. Companies with volatile R&D phases need R&D expenditure cover to ensure that they are not wasting years on R&D that could be lost in an instant and never recovered.
- Intellectual property: For companies involved in developing new products, intellectual property cover is a must—it protects them from copyright, trademark or patent infringement claims. Insurers offer protection against third-party infringement of clients’ intellectual property, as well as protection in the event clients are alleged to have infringed a third party’s intellectual property.
- Terrorism and ideologically motivated attacks: Most UK insurers exclude terrorism cover, but some in the life sciences industry do offer it. Terrorism and ideologically motivated attacks cover protects against damage caused by politically motivated acts of destruction. Your scope of cover will depend on your insurer’s definition of ‘terrorism’, as some insurers only provide protection for ‘political’ terrorism, not ‘ideological’ or ‘religious’. As a life sciences business developing life-saving products using what some may deem controversial methods, terrorism and ideologically motivated attacks cover provides necessary security.
The Main Extensions
Given the varied needs of businesses in the life sciences industry, insurers offer a spate of policy extensions that businesses can use to tailor their policies in order to fit their individual needs. Some of the main extensions to life sciences and biomedical policies include:
- Controlled environment deviation
- Machinery breakdown
- Computer breakdown
- Public relations crisis management
- Data protection
- Stock deterioration
What is not covered on life science insurance?
There are some things that most life sciences insurers refuse to underwrite, such as:
- Certain clinical trials
- Confiscation by government, public, local or customs authority
- Radioactive contamination
- Fines and penalties
Common Exposures in the Life Sciences Industry
At a glance, the life sciences sector consists of all organisations with purposes related to developing or producing their own pharmaceutical or medical technology (medtech) products. The industry is largely connected to the supply chain and specialist service sector, since life sciences businesses rely heavily on unique, high-value raw materials to manufacture their products. Because of this, major exposures for the industry include product liability, safe handling and storage of sensitive raw materials and final products, property theft (both physical and intellectual), cyber-security and more.
The specialist nature of life sciences businesses creates unique risks. Are you properly managing your life sciences organisation’s industry-specific risks? The list below provides an overview of these niche risks and more—helping you identify potential blind spots in your risk management and insurance programmes.
- Property exposures in the life sciences sector are substantial and can come from many sources, including machinery failures, improper material storage or spoilage, natural disasters, employees, suppliers and other third parties. When discussing property exposures, chemical, fire and machinery damage are of particular concern, and life sciences organisations face an elevated level of risk due to hazards like complex machinery, the use of chemicals and other hazardous, potentially flammable materials, storage of sensitive data and processes that require extremely sterile conditions. Additionally, dishonest employees in a workplace with innovative ideas, new discoveries and exciting research can contribute to the likelihood of intellectual property theft.
- Life sciences organisations depend on functioning equipment to manufacture their products effectively. In the face of a machinery breakdown, you can experience business interruptions or even prolonged closures. What’s more, machinery breakdowns can even lead to major property damage should machinery leak or start a fire, compounding the cost for your business.
- Crime and cyber-security can be a challenge for life sciences organisations, especially because their operations often include the handling and distribution of high-value products, equipment and sensitive data. To make matters worse, thieves can strike at any time, leaving owners to recoup any lost funds, materials or equipment. In this day and age, thieves (including your employees) do not need direct access to funds to steal from you—merchandise, supplies and data are all fair game. And in the age of the GDPR, a data breach can result in costly consequences. What’s more, the location of a life sciences lab or plant as well as its hours of operation can have a significant impact on its level of crime risk.
- As a life sciences organisation, you are responsible for property that may not be covered by traditional insurance. Cover for transport exposures, such as goods in transit, marine cargo and stock throughput insurance can fill these gaps. Without a proper marine cargo policy, property that’s unique or valuable, in transit, in your temporary care, stored at fixed (but movable) locations or used to transfer information represent major exposures. Specifically for life sciences businesses, marine cargo insurance can provide much-needed protection for high-value raw materials, computer equipment, data and records, and final products transported to various locations.
- Directors and officers liability can be significant for life sciences organisations, as poor practices and business disasters are often traced back to senior-level management. Between strict data protection regulations—such as the GDPR—that could hold directors and officers accountable for cyber-attacks, and the unique nature of being associated with disease management, illness prevention and health care professionals that often encounter life and death scenarios, one simple mistake can become catastrophic for senior management.
- Proper health and safety practices are a critical consideration for life sciences organisations and a primary source of public and product liability. The potential for contamination, spoilage and chemical reactions (eg explosions or fires) is ever present, making continued customer safety a challenge. In the event that one of your customers becomes ill, injured or harmed due to the use of your products, your business could face legal ramifications (eg legal action, HSE inspections and fines) and suffer irreversible reputational damage. Additionally, improper controls for air, noise, water and waste treatment at your facility can lead to various environmental exposures, resulting in the potential for environmental liability concerns.
- Your employees may be required to operate a vehicle on behalf of your business in order to transport or deliver raw materials, machinery or final products, creating motor vehicle and ground transport exposures in the process. While important for daily operations, the improper use of a vehicle can lead to potential accidents and major insurance claims. What’s more, if you allow employees to use their own vehicles for work, standard motor vehicle policies are often not enough. Additionally, unsuccessful deliveries or pick-ups by incompetent or uncertified drivers can increase the likelihood of theft, damaged materials or products, and overall financial loss.
- Life sciences organisations frequently rely on various suppliers for unique, high-value raw materials to manufacture their products. With this in mind, broken supply chains can easily cause disaster for your business and ultimately put a stop to production if proper risk management systems and business continuity solutions aren’t in place.
- On-site accidents in the laboratory or at the manufacturing plant can lead to costly employer’s liability claims. Complicating matters, there are a number of risks to account for, including cuts and burns; slips, trips and falls; ergonomic-related hazards; workplace violence; and chemical exposures. Things like improper lifting techniques, poor chemical safety and inadequate training can all cause your employees to suffer an injury on-site—disrupting your business and negatively impacting your bottom line.
How Business Insurance Service can help
As a life sciences business, you need comprehensive insurance protection to safeguard against the risks that a normal commercial insurance policy will not cover. While the proper risk management practices can reduce certain exposures, no system is 100 per cent effective in ensuring an accident-free workplace.
As a result, it’s all the more crucial to work with a qualified insurance broker to not only assess your exposures, but secure the appropriate cover as well. To learn more, contact Business Insurance Service today.
We’re members of the British Insurance Brokers Association (BIBA) and work with some of the largest and best-known insurance providers in the UK, including Lloyds of London for larger, more complex and high-risk customers. We’re fully regulated and committed to delivering a premium quality, trustworthy and reliable service to all our customers, regardless of size.