Manufacturing Automation and Green Products Create New Insurance Risks

Canadian manufacturers are fundamentally reshaping their operations through automation, digitization, and sustainability initiatives—creating a complex new risk landscape that insurers are still learning to navigate.

According to Alexander Jeyasingham, vice president and senior underwriting manager for the Ontario and Atlantic region at Liberty Mutual Canada, the risk profile of a typical manufacturing facility has transformed dramatically in just the past decade. The convergence of labor shortages, reshoring pressures, and decarbonization goals is driving changes that affect everything from fire suppression to liability exposure.

Why it matters

As manufacturers race to remain competitive through automation and green product lines, they're introducing risks with limited loss histories—from lithium-ion battery fires to greenwashing liability. Insurers who understand these emerging exposures can provide more accurate coverage, while manufacturers who engage early on risk management will find better terms and avoid costly gaps.

Automation concentrates risk in new ways

Labor shortages are pushing Canadian factories toward robotics and automated systems that can maintain output with fewer skilled workers. While automation removes people from dangerous tasks, it creates new dependencies on specialized equipment and control systems where failures become more complex and expensive.

A particular concern is the proliferation of lithium-ion batteries powering mobile equipment, robots, and backup systems throughout facilities. These batteries present distinct fire and suppression challenges that traditional sprinkler systems may not adequately address, Jeyasingham noted in an interview with Insurance Business.

The shift is forcing insurers and manufacturers to collaborate earlier in facility design and retrofit projects, with risk engineers scrutinizing sprinkler specifications, storage configurations, and equipment layout before installation.

Cyber exposure moves to the factory floor

The drive for efficiency has blurred the line between information technology and operational technology. Connected sensors, remote monitoring, and automated control systems are now standard in many Canadian plants, improving quality and throughput but also expanding the cyber attack surface.

A successful cyber incident can now shut down physical production, not just office networks. That reality makes cyber insurance and basic controls like multi-factor authentication and network segmentation core operational concerns rather than IT afterthoughts, according to Jeyasingham.

Institutional knowledge walks out the door

Even as technology advances, the human element remains critical. Many manufacturers struggle to replace experienced workers who hold institutional knowledge about processes, equipment quirks, and informal workarounds that were never documented.

This knowledge drain affects safety, maintenance, and incident response—especially in complex automated facilities with fewer seasoned operators to recognize early warning signs. Insurers are increasingly probing training programs, onboarding processes, documented procedures, and succession planning during underwriting discussions.

Sustainability claims create liability exposure

Manufacturers are also retooling to meet decarbonization targets and circular-economy goals, experimenting with new materials and greener product formulations. Rising consumer demand for low-impact products is driving this shift, but it's creating uncertainty since many of these technologies have limited real-world loss histories.

Insurers are scrutinizing how environmental and performance claims are worded and whether companies can substantiate them. Broad assertions about recyclability, carbon impact, or other sustainability features can create liability if later challenged, Jeyasingham explained.

What underwriters want to see

Manufacturers who fare best with insurers share common traits: transparency, early engagement, and follow-through on risk engineering recommendations. Flagging operational changes or expansions before they're finalized gives underwriters and risk engineers the opportunity to shape coverage and controls proactively.

Treating the insurer as a technical partner rather than a commodity vendor matters, as does maintaining accurate property values, realistic business interruption calculations, and clear continuity plans. But one factor stands out above all: actually implementing the risk mitigation advice received, not just acknowledging it.

These details were first reported by Insurance Business in an interview with Jeyasingham.