3D printing, a technology that promises to revolutionise the way things are made, is gaining popularity and acceptance in various industries and it’s set to bring great changes to the insurance industry too.
Known as additive manufacturing (AM), because it uses a range of laser-based or advanced printing techniques to build up models layer by layer. 3D printing allows individuals to produce physical objects from plastics and metals with equipment that is becoming increasingly accessible.
Worldwide shipments of 3D printers are projected to increase from about 490,000 in 2016 to more than 5.6 million in 2019, according to Gartner Inc.
Goldman Sachs has identified 3D printing as one of eight “extraordinary technologies forcing businesses to adapt or die,” with the potential to reach $10.8 billion in revenues by 2021.
As the technology advances and personal 3D printers become more affordable, their growing use in small businesses and homes poses unprecedented questions for the insurance industry.
When the end user of a product is also the manufacturer, who can be held strictly liable when a defective 3D-printed product causes a person’s injury, illness or economic loss? The designer? The company that made the printer? The person who used the printer?
While there is not yet adequate case law by which to fully gauge the risks of this new technology, there are issues that professionals in the insurance field should already be thinking about.
Intellectual Property (IP)
3D printing is especially susceptible to intellectual property theft because the underlying product design software can be used to make counterfeit products easily and at relatively low cost. Researchers at the University of California have discovered that hackers could steal the source code of a 3D printed product by detecting the sound waves created by each movement of the printer.
The software to detect and record the sound waves could be installed on a smart phone, and most manufacturing facilities do not monitor production workers’ smart phones.
In a press release, researcher Al Faruque said. “If process and product information is stolen during the prototyping phases, companies stand to incur large financial losses.”
Business Interruption
3D printers can require more power to operate than traditional manufacturing equipment; backup generators might not be robust enough in the event of a power outage and as a result the business production could be disrupted.
Also, businesses that use 3D printers should prepare for their potential breakdown and in such an event, it could take an extended period of time to repair or replace the 3D printer. And for that reason, it will be vital to understand the various types of 3D printers and their working technology.
On the other hand, the application of 3D printing might actually reduce the indemnity period as necessary parts may be just printed on site.
Product Liability
The current Product Liability (PL) laws may not be suitable to deal with 3D printing, and PL could potentially be one of the biggest risks associated with the emergence of the technology.
Because 3D printing involves multiple participants, including the producer of the materials used, the software designer, the printer manufacturer and operator, and the retailer. Problems that can arise could come from using wrong materials, as well as issues with tracing the liability of faults in 3D-printed products.
In the healthcare sector, Aprecia Pharmaceuticals was the first to win US Food and Drug Administration (FDA) approval to manufacture its Spritam pill using 3D printing technology. The pill, an epilepsy drug, which dissolves quickly in the patient’s mouth, brings a significant benefit to those who have trouble swallowing pills.
For pharma companies, lawsuits have always been a cost of doing business. However, Aprecia by manufacturing its pill with the new technology might expose itself to unfamiliar territories full of potential new risks. If the company gets it wrong with its 3D printed drug and it causes adverse effects in patients, it could seriously be liable for damages in a court of law.
Security
In a similar way to the pharma industry, the Federal Aviation Administration (FAA) recently certified 3D printed parts for General Electric (GE) commercial jet engines. GE uses the technology to introduce a number of benefits to its parts manufacturing such as being lighter in weights, simpler design and better performance from the engines.
Another company following the trend is the mighty Ford Motor Company who uses 3D printing to build products and prototypes. But the new technology poses real security threats similar to those in other industries. Because of its digital nature, 3D printing technology is susceptible to theft or sabotage by hackers.
A team of cybersecurity and materials engineers at the New York University (NYU) Tandon School of Engineering has conducted a research into the implication of cybersecurity of 3D printing technology.
Ramesh Karri, a professor of Electrical and Computer Engineering at NYU, who participated in the research, has pointed out that an attacker could hack into a printer that is connected to Internet to introduce internal defects as the component is being printed.
He also added that “new cybersecurity methods and tools are required to protect critical parts from such compromise”. This could result in a “devastating impact” for users and could lead to product recalls and lawsuits.
Finally, the question on everyone’s lips is how is the insurance market responding to 3D Printing?
Until courts address the many liability questions posed by this emerging technology, all of those involved in the process would be best served to seek frequent guidance from legal counsel and their insurance brokers.
Richard Weireter, Senior Treaty Underwriter at Swiss Re, recently commented that like any new technology reshaping our daily lives, the insurance industry adapted to the new ways and created new products to satisfy the market. He said “I expect to see many of those situations to arise with 3D Printing.”
