How Will 3D Printing Impact Insurance?

The manufacturing and health care sectors are already using 3D printing for prototyping and more. But the Agents Council for Technology (ACT) Changing Nature of Risk work group expects 3D printing to become increasingly commonplace as the price of the technology decreases and other industries embrace it.

Also known as “additive manufacturing,” 3D printing is a process used to synthesize a three-dimensional object by forming successive layers of material under computer control. These objects can be almost any shape or geometry and are produced from digital model data, a 3D model or another electronic data source, such as an additive manufacturing file.

This technology will significantly change product design, development and manufacturing as we know it—especially as an enabler for the gig economy. The most affected industries will likely be automotive, aerospace, construction, engineering, food, home and medical, where 3D printing is expected to have a particularly positive impact regarding prosthetics and joint replacement.

TED Fellow Skylar Tibbits’ next development in this space is 4D printing, where the fourth dimension is time. This emerging technology will make it possible to print objects that can reshape themselves or self-assemble over time.     

But today, the process is already democratizing manufacturing by enabling immediate, “just-in-time” product and parts creation, which significantly impacts inventory. The technology could reduce imports if American manufacturers are able to produce products locally and cost-efficiently, and 3D printing will soon change the way all product-based companies do business by enabling almost anyone will to become a “boutique” manufacturer.

But this shift will have downsides for the economy, as well: It will force retail outlets that formerly sold mass-produced products out of business, and it’s likely to lead to an increase in black-market items and forgeries. And by reducing the timeframe required for product development, prototyping and spec work, 3D printing will also disrupt product distribution and reduce labor and production costs—rendering smaller manufacturers and engineers obsolete, and putting additional manufacturers and laborers out of work.

Finally, because 3D printing is not currently regulated, anyone could potentially buy a 3D printer and produce items that could have sweeping negative consequences, such as weapons. Copyright and trademark infringement are also likely to result from 3D printing, since the technology makes replication easier than ever.

What does all this mean for the insurance industry? Product liability for the printer itself, the material used in printing, or the intellectual property and software may trace back to the manufacturers of the 3D printers. But because the technology is still fairly new, the legal implications regarding product liability are still vague, especially for personal use.

Beyond product liability concerns, 3D printing will increase risk opportunities and therefore premiums. It will significantly change underwriting and create new actuarial disciplines, and as companies become more technical, they’ll be more likely to need a solid risk manager. 3D printing could also lead to more efficient claims processes as policyholders become capable of repairing and replacing their own broken or failed auto or home equipment. Finally, the technology is likely to result in greater opportunity for integration between carriers and vendors to connect to home 3D printers and automatically generate repair parts after diagnostics.

Make sure staff at your agency is aware of the basic 3D printing concepts and applications, and review your current customer base for possible impacts. It’s also a good idea to review your standard market policies to determine coverage gaps, and detail the challenges with each topic, such as liability for hacking, impacts of possible system or sensor failure, issues in the event of a power outage.

The insurance industry needs to be very clear about potential product liability issues before we can properly communicate them to clients that use 3D printing in their businesses. It remains unclear how personal use of 3D printing will affect homeowner’s insurance, specifically for liability. As an insurance agent, you can avoid an errors & omissions disaster by asking more in-depth questions about personal property and home-based business ventures.

Cindy Donaldson is CEO of Red Barn Consulting. Rick Morgan is a consultant with four decades of experience in the independent agency system.

This article is adapted from the Agents Council for Technology’s risk advisory on 3D printing. View the entire Changing Nature of Risk advisory series online.