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Medical technology.

The last few decades have been a period of breathtaking development in medical technology, and this progress appears to be far from over. It was born out of the new opportunities presented by electronics and computer science, which, in conjunction with pioneering spirit and intensive cooperation between engineers and physicians, have led to the advanced state of the art today. Moreover, with a current worldwide turnover of around DM 60 billion and rising, medical technology continues to be dynamic in its development not only in scientific but also in economic terms.

The fact that medical technology is mostly very capital-intensive and that large quantities of such equipment are often concentrated in a relatively small area presents a considerable challenge for the insurance industry all over the world. In one of its most recent special publications, the Munich Re - leading worldwide reinsurer not least in questions of engineering - provides information on the development and current significance of medical technology and gives advice on how insurers should handle the often unfamiliar risks involved.

The World Health Organization has estimated that the expenditure required in 1990 for the maintenance or restoration of health throughout the world amounted to more than US$1,000 billion. On the basis of extrapolations, however, the economic losses resulting from ill health were probably between seven and ten times higher. According to manufacturers' figures, the annual volume of medical technology products sold worldwide totals in excess of DM 60 billion. Of these products, around 30% were made by US manufacturers and about 15% each by German and Japanese firms.

Sales in this branch of the economy in Germany amount to about DM 10 billion. Economists assess the annual economic benefit of medical technology as being substantially higher. Its achievements include a marked increase in life expectancy and shorter stays in hospital. Sometimes medical technology also obviates the need for lengthy and risky courses of treatment or operations. Diagnostic radiology, ECG and EEG are concepts with which even laymen are now familiar. Computer tomography, magnetic resonance tomography and endoscopy considerably facilitate the diagnosis of diseases; radiotherapy, in dealing with tumours, and lithotripsy, for pulverizing kidney stones, have both established themselves as successful methods of treatment.

The high capital outlay on medical equipment is matched by a correspondingly high loss potential, with damage, malfunction or breakdown posing the threat of considerable financial losses. Because the appliances usually do not take up much space, a large number of them may be installed in a comparatively small area. As a result, very high concentrations of values are common, e.g. in the radiological departments or operating theatres of modern hospitals. Here a fire, for example, can cause a huge loss. In addition, many medical appliances and installations are precision instruments containing the most delicate mechanical and microelectronics components. Even the smallest deviation from their proper working condition may affect operating safety. Microelectronics components are highly sensitive to such things as fluctuations in temperature, humidity, dust and dirt. If the functioning of a medical appliance is only slightly impaired or its reliability open to doubt, the situation may very well require the expensive replacement of parts or indeed the machine as a whole.

The need for comprehensive coverage of medical equipment can be met by Electronic Equipment insurance and its supplementary cover, Electronic Equipment Loss of Profit insurance. Since a precondition for the insurance is usually a maintenance contract, such coverage also indirectly protects patients and users against malfunctions of these appliances.

Liability claims must not be forgotten either. The consequences of faulty design in the manufacture of medical equipment were demonstrated by a case in 1977, in which roughly 10,000 defective heart pacemakers had to be recalled worldwide. If an appliance produces incorrect diagnostic readings or injures a patient during treatment because it was wrongly operated by the physician, insufficiently maintained by the hospital or badly designed or produced by the manufacturer, the result may be a serious health impairment or even death.

Proper assessment of the risks, taking due account of the technical and medical facts, requires a high degree of specialist knowledge on the part of the insurer. For this - as the publication aims to show - he can draw on the detailed knowledge and experience of his reinsurer. The provision of expertise in this field is just one example of the prominent role played by specialists from a wide range of disciplines and nearly all walks of life in the modern operations of a reinsurer like the Munich Re.
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Title Annotation:recent developments
Publication:Economic Review
Date:Feb 1, 1993
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