Case study

The hidden costs of unsafe warehousing: A guide to insurance implications

Dec 13, 2023 | Pallet Racking, Uncategorized

Are you aware of the strong association between warehouse safety and insurance? At the centre of warehouse management there’s a complex interplay between safety and insurance, and only by handling one strategically will you harness the benefits from the other. The focus of this article is to highlight the profound implications on insurance coverage for warehouses that lack a commitment to safety and to guide you through actionable strategies that will help you towards a seamless, resilient, and financially guarded operation! We’ll underscore various aspects of training, inspections, and pallet racking integrity, and how they hold a considerable sway over insurance considerations.

Warehouse shelving system

The unseen costs of compromised safety

A recent study by Forbes UK show that a warehouse operative is the third most dangerous occupation in the UK, therefore it’s not at all surprising that the monetary protection provided by insurance is closely bound by safe working practices. From the insurer’s standpoint, unsafe warehousing is a costly matter, and not one they want to be affiliated with. This means that the implications of unsafe practices will go far beyond the risk of accidents and injury, it’s likely to harm the financial health of the entire operation. As we unveil the close link between insurance and safety, you’ll grasp the rationale behind a practical approach to warehouse safety and how assuming responsibility and addressing risks can contribute towards positive insurance outcomes. Before proceeding, let’s review how unsafe warehousing manifests when it comes to insurance cover, premiums, and limitations.

Insurers disposition on unsafe warehousing

Unsafe warehousing can only mean unsafe working conditions, and from an insurers perspective this will indicate the following:

  • Heightened risk perception – When determining premiums, insurance providers will assess risk levels and if findings reveal a higher likelihood of incidents involving people or assets, the premiums will be increased.
  • Increased probability of claims – Accidents and injuries will likely occur more frequently within an unsafe working environment. Insurers will anticipate a higher possibility of claims, and this will demand higher premiums.
  • Significant payouts – Theres a higher probability in unsafe working environments that the severity of injuries or damage may be intensified, and this can impact the cost of coverage.
  • Poor loss history – Insurers will assess loss history and a high frequency of claims due to unsafe working conditions which will impact premiums and comprehensive cover.
  • Non-compliance with safety regulations – Insurers are likely to consider any failure to comply with safety regulations and this can lead to higher premiums and limited coverage.
  • Potential policy exclusions – If insurers find a history of unsafe working conditions and practices, safety related incidents may be excluded from the policy altogether, which could expose the business to increased financial risks.
  • Refusal of coverage – A persistently unsafe warehouse could find itself unable to obtain coverage as insurers deem it too risky to cover a warehouse that does not prioritise safety. This can put the business in an extremely vulnerable financial position.
  • Absence of employee liability coverage – A high risk of employee injury may limit the ability to obtain cover in this specific area. Where safety is prioritised in a warehouse, there is a legitimate opportunity to benefit from lower premiums, efficient coverage, and good relationships with insurers. Conversely, poor safety practices can lead to high premiums, limited cover, and exclusions.

Specialist Coil Racking

Actionable Strategies to achieve a safe and insurable warehouse!

To transform your warehouse from a risk-laden environment to a secure one, you’ll need a comprehensive approach to safety and risk management where actions to identify, resolve and prevent potential issues are systematically taken. The recommendations below could help you to create a much safer and insurable warehouse:

Initiate a detailed safety review – The initial step is to uncover potential hazards and risks within the warehouse environment by collecting and analysing information. This will provide crucial insights that will help to pin-point areas of concern when it comes to safety. The review will analyse all aspects of the operation including racking and warehouse layouts, structural issues such as damage or components of different manufactures being forced together, matters around staff training, fire safety and records of previous safety incidents. In some instances, insurers will instruct one of their own surveyors to complete an on-site insurance risk survey before advising on required actions and recommendations.

Categorise defined risks – Once you have established areas of risk, classify them into categories. For example, group the risks under:

  • Equipment malfunctionsFork lift truck (FLT) incidents can occur due to malfunction such as hydraulic issues. Pallet racking failures could also come under this category where potential structural issues or pallet racking overloading could lead to collapse.
  • Operational risks – Inadequate safety training or lack of safety protocol awareness could be classified as operational risks. In addition, an inefficient workflow design can also cause operational risks as warehouse congestion can lead to collisions and blockages. Another thing to consider here is improper storage where incorrect loading and incorrect labelling can encourage the overloading of pallet racking.
  • Physical hazards – This would include concerns such as the risk of falling objects from the racking or lack of segregated walkways for pedestrians.

Undertake a severity assessment – For each identified risk, evaluate the severity by considering the potential impact on the safety and wellbeing of employees and general warehouse infrastructure.

Consider the probability of occurrence – Consider, historical incident data, current operational procedures and staff straining standards to establish the likelihood of a risk developing into an actual incident.

Create a risk priority chart – Consider the likelihood of incident occurrence, severity levels, regularity compliance and potential liability to create a risk matrix to help guide you through actionable items. This matrix should be shared and discussed amongst all health and safety personal as part of a collaborative effort to rectify the discovered hazards.

pallet racking protection barrier and upright guard Once you have established the potential risks in your warehouse, you can tackle these through a combination of immediate actions, long term strategies and regular monitoring:

Immediate action items

  • Introduce regular emergency evacuation drills to ensure all employees are aware of emergency procedures.
  • Enhance access to emergency equipment such as fire extinguishers and first aid kits, by ensuring they are always readily available and in suitable locations.
  • Schedule a professional racking inspection for the earliest available time, particularly if the racks haven’t been inspected for over a year or there are any obvious areas of concern.
  • Display warning signs and load notices where appropriate and secure any danger zones with the use of wired mesh or barriers.

Long term strategies

  • Optimise the warehouse layout to improve flow and accessibility, making the movement of people and equipment easier and safer.
  • Introduce an annual schedule for racking inspections to help maintain the safety of the racks and compliance with regulations centred on workplace safety.
  • Arrange racking inspection training for operatives to enable in-house checks to be carried out periodically throughout the year and the competence to take appropriate action where risks are detected.
  • Ensure fire marshal and first aid training is undertaken by personnel specifically selected from various departments and shifts so there is a continuation of knowledge and competence wherever and whenever it is needed.
  • Always choose a Trade Body Trusted provider to develop and execute your storage solutions as insurers often consider this to be significant. By selecting a Full SEMA Member, adherence to the best industry standards, a commitment to safety and respected expertise is expected, making this more favourable to insurers.

Racking project being undertaken

Regular reviews

  • Conduct Incident reviews, ensuring a thorough investigation whenever a safety incident occurs and document all findings. A structured and thorough investigation allows route causes to be established and incorporates lessons learned with opportunity to improve safety protocol to prevent the same incidents from recurring.
  • Maintain training effectiveness by regularly assessing training needs to help identify gaps in the knowledge and experience of the team with the aim of ensuring that only relevant training programs are being undertaken. Gathering feedback after training from both the delegates and trainer will help determine the effectiveness of the training and support continuous improvement when it comes to the content, method, and deliverance of training programs.
  • Keep up to date with regulations by periodically checking the official Health and Safety Executive (HSE) website for any changes. You could also sign up to receiving newsletter updates from relevant safety organisations including HSE and engage with industry professionals through networking to help stay informed.
  • Conduct regular warehouse safety audits which can be undertaken every quarter or every six months, depending on the size of the operation. The audits should cover a range of safety protocols including emergency exits and procedures, fire safety, equipment safety including safe use, housekeeping and cleanliness, storage practices, personal protective equipment (PPE) usage, electrical safety and first aid facilities. Assessing key areas can help to ensure a secure working environment with continued compliance with regulations.
  • Prioritise safety when embracing innovation. The introduction of automation and robotics demands a concentrated emphasis on safety. Not all warehouse premises or set-ups have been designed for robotics, therefore the potential impact on layout design, regulation compliance, sprinkler configuration and employee training should not be overlooked.

Racking being professionally inspected

In conclusion……

Whilst giving greater importance to warehouse safety is a moral responsibility, it is also an approach which is likely to spur far-reaching outcomes when it comes to insurance Where a robust and long-term commitment to high safety standards and practices is transparent to insurers, they are less likely to hike premiums, limit coverage or refuse cover altogether. Instead, they will regard the operation as lower risk which will give them the flexibility to offer much better coverage and terms. If you’re looking to improve the safety of your warehouse, WSL can help in multiple ways from incorporating a safer, more optimal layout, to inspecting your racking structure. We can even conduct a training session to help your team to learn how to inspect your racks internally. To achieve the peace of mind of a safer warehouse, contact WSL today on 0113 2045350 or email

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