Common exposures in the life sciences industry

Life science risks

At a glance, the life sciences sector consists of all organisations with purposes related to developing or producing 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 these industry-specific risks for your business?

The list below provides an overview of these niche risks to help 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, 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. Anybody with the attention to steal (including your employees) does 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 represents 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.

Director’s and officer’s 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 (e.g., explosions or fires) is ever-present, making continued customer safety a challenge. If one of your customers becomes ill, injured, or harmed due to the use of your products, your business could face legal ramifications (e.g., 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.

In developing bespoke wordings for the Life Sciences sector, Howden recognise the sometimes-onerous contract conditions that life sciences organisations are forced to agree to when trading with large global suppliers and the need to adapt their Products Liability insurance policies to cater for indemnities that go beyond legal liability.

Life sciences organisations frequently rely on various suppliers for unique, high-value raw materials to manufacture their products. 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.

Your employees may be required to operate a vehicle on behalf of your business 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.

On-site accidents in the laboratory or at the manufacturing plant can lead to costly employer’s liability claims. Complicating matters, there are several 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.

While the proper risk management practices can reduce certain exposures, no system is 100% effective in ensuring an accident-free workplace.