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Technology is reshaping the insurance industry.  From AI to generation Z, we discuss the developments you need to know about.


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Technology predictions

Pre-flight passenger testing: the new norm?

In seeking to resuscitate the global commercial air travel industry, it is all but inevitable that compulsory pre-flight testing, to screen passengers for COVID-19, will replace existing quarantine measures.  In the course of 2020, in response to the pandemic, the public has adjusted to voluntary testing. Yesterday’s taboo has become today’s norm. Taking this beyond the response to COVID-19, the time may be ripe to embrace additional pre-flight passenger testing.  Disruptive passenger behaviour in-flight is irksome at best, can cause flight diversion (a costly operational headache for the carrier) and has the potential to cause serious incident or accident, with attendant costs to aviation insurers.  Against a backdrop of growing public acceptance of testing, has the time come to introduce mandatory breathalyser tests prior to boarding? 


New risks of injury from advancements in robotic technology

As automation, robotics and drones reduce the need to work in hazardous environments and carry out routine or repetitive tasks, such technologies may give rise to new risks of injury through trapping, entanglement, noise and vibration for anyone working alongside them. Sensors on collaborative robots should help to ensure physical safety for employees but if the sensors fail or suffer cyber attack, there may be an increased risk of injuries to workers. This will lead to potential claims for damages and regulatory investigations for potential health and safety offences.


Protection of electronic data in modern construction needs fresh focus

2020 has of necessity been a voyage of electronic discovery for many businesses, using resource over multiple protected electronic platforms. Through Building Information Modelling (BIM), the past five years has seen the construction sector moving inexorably towards an all-encompassing common data environment. Electronic design data-sharing is ordinary but the intervention of malicious actors in a BIM based cyber-attack has the potential to affect multiple design disciplines and to ground a time sensitive project at potentially enormous cost. While this spectre is real, a 2019 government cyber security breach survey found the construction sector among the least likely to invest in cyber security, to update managers on cyber issues or to be aware of data regulation. This is a risk that warrants re-focused attention in the construction sector. 

Modern methods of construction and the imperative for best practice

In October 2020, Housing secretary Robert Jenrick announced that at least one-fifth of all homes planned through the government’s £12bn affordable homes programme will be built using modern methods of construction (MMC). These homes are intended to be largely constructed in controlled prefabricated factory conditions, improving consistency and the unpredictability of disruption caused by the outside elements. The increased productivity promises many more homes delivered over a shorter period. However, for construction insurers, claims trends continue to emerge from prefabricated buildings where repeated errors have been made in buildings that have been defectively assembled, contain incompatible specifications or materials, or which present additional fire loading. MMC is here to stay, but further emphasis on best practice must form a central part of the road ahead.   

An Australian perspective: digital reform initiatives reboot New South Wales building industry

The New South Wales (NSW) Government is implementing a building reform agenda with the aim of changing the culture and capability of the NSW building industry. The deep, wide-ranging reforms are being implemented in stages from 1 July 2020. The reform is being driven by the capabilities within NSW’s new digital platform, which will create ‘digital twins’ of both buildings and practitioners. These initiatives will give insurers a transparent and accessible way to rate buildings and professionals. This information, combined with other reform initiatives, should result in the building and construction industry being a much better insurance risk in the long run. The projected infrastructure spend and wider building reform agenda throughout Australia should allow insurers to dramatically adjust products and pricing with sophisticated customers.


A UK and US perspective: with the balance of any workforce now ‘remote’, increasing demands for remote accessibility and reliance on cloud service providers will trip up those companies that do not adapt cyber security to the new normal

While businesses have been quick to adapt to remote working in the wake of the COVID-19 pandemic, not all IT departments have had the chance to secure business-critical systems for the new reality of the virtual workplace. The majority of modern day cyber threats exploit vulnerabilities in the Remote Desktop protocols and servers supporting the running of office communication software. Such previously unknown, so-called ‘zero day’ vulnerabilities are discovered on a daily basis by cyber criminals and it is imperative for all information security professionals to review patching and security measures surrounding newly activated remote access. In the US, growing reliance on cloud service providers under COVID-19 is making it more difficult to determine whether an occurrence is an insurable failure of the insured’s computer system or an uninsurable infrastructure failure. Unless the insurance market begins to adjust to this new reality, carriers may find themselves on the wrong end of future US court judgments.

Schrems judgment and Brexit will drive data localisation

The recent decision by the Court of Justice of the European Union (CJEU) in Schrems II, which invalidated the adequacy status of the EU-US privacy shield, spiked a wave of uncertainty across the privacy departments of businesses whose operations rely on EU-US data transfers. While the CJEU did not invalidate the alternative mechanism of standard contractual clauses, it imposed onerous obligations on companies processing data outside the EU who are relying on them. This has resulted in onerous guidance from the European Data Protection Board as to the due diligence and supplemental measures that must occur when transferring personal data overseas. The end of the UK’s post-Brexit transition period and the present lack of clarity as to whether the country will be afforded adequacy status by the EU only adds to the uncertainty for British and foreign organisations wishing to transfer data to or from the UK. A seemingly easy solution is the relocation of data centres to other EU member states, but such data localisation practices can be costly.

Companies need to consider the data protection rules around the use of AI

From Uber to the UK Government’s attempt to introduce predictive grading to replace the cancelled A-Level exams, the use of Artificial Intelligence (AI) has proved controversial. Companies wishing to utilise possibilities presented by AI should be aware of the range of risks involved in the use of technologies processing personal data in opaque ways with complex algorithms. The issue certainly caught the interest of the UK Information Commissioner’s Office (ICO) which recently launched detailed guidance explaining how data protection principles apply to AI projects. The ICO’s guidance raises specific awareness around automated decision-making and issues of transparency and sends a message to organisations that the use of AI is now on the regulator’s priority list.

An Australian perspective: Australian Government will boost cyber security for infrastructure and businesses

Cyber resilience will continue to be a priority for Australia, as outlined in the Government’s 2020 Cyber Security Strategy. The strategy includes A$1.67bn pledged over the next decade to enhance cyber-security capabilities across government, businesses and the community through programmes and regulatory reforms. These are aimed at protecting Australia’s critical IT infrastructure and systems of national significance, and building cyber security support and standards for businesses, with tailored support for SMEs. Data extortion will remain a major problem, particularly as the size of ransoms are increasing significantly. The Office of the Australian Information Commissioner (OAIC) has become increasingly proactive over ransomware incidents. The OAIC is expected to take more action against companies for not adequately securing personal information in 2021.  This will force companies to reconsider how they secure key customer data and intellectual property.


A German perspective: 2021 will see a need to balance regulatory requirements with technological developments

The regulatory framework for selling insurance products has been strengthened over the last few years. At the same time, selling insurance contracts via cross selling or stand alone online is becoming more and more important. New technologies such as artificial intelligence are big drivers as well. It is a difficult task for insurers and product distributors to combine both a digital sales path and regulatory compliance and we wait to see in the coming year which market participants will be able to compete with big data specialists like Google or Amazon, who are already focused on this market.


Cyber attacks on shipping companies highlight that the shipping industry is now a prime target

Cyber risk is now front and centre for the shipping industry after the International Maritime Organisation (IMO) suffered the same fate on 1 October 2020 as the four largest shipping companies, all of which have been the target of major cyber attacks in the last three years. With apposite timing, the IMO Resolution MSC.428(98), requiring ship owners and managers to assess cyber risk and implement relevant measures across all functions of their safety management system, comes into force on 1 January 2021.  This will be welcome news for marine and cyber insurers alike, who have been developing products to help limit the operational impact of cyber attacks.  To date, these impacts have been largely limited to shore-side operations, but with increased interconnectivity with vessels and use of automated systems, the spectre of a significant physical damage loss at sea looms ever larger.


Increased use of individual, tailored healthcare expands risks for clinicians and suppliers

With increasing awareness and prevalence of healthcare devices, wearables and applications, individuals are using more healthcare technology to monitor their own health, bringing a raft of benefits to self-management and healthcare providers.  For example, an individual’s own monitoring of diabetes, remotely, can help alleviate the resources of a healthcare provider and allow an individual to take action earlier.  Alongside these benefits, however, lie the increased risks of cyber and data protection breaches, tech failures, and failures in communications with clinicians. These all bring risks not just for clinicians, but also for technology designers, providers and their insurers.

Will COVID-19 speed up the change to virtual healthcare?

It is possible that we will not go back to the same way of delivering healthcare.  Virtual healthcare, or virtual appointments, has inevitably been increasingly used during the pandemic.  Notwithstanding the elimination of transmission, it is easy to see why:  it should be quick and efficient for patient and provider alike (certainly for routine patients or issues).  However, this modernised manner of healthcare provision may not be suitable for multi-faceted conditions, and cannot change the way some care or treatment must be delivered (eg surgery).  In addition, the way in which virtual consultations take place may result in mis-diagnoses, or ‘soft’ issues being missed in the way that they may not have been in person. 


Changing mobility habits and the regulation of e-scooters will herald an increase in vulnerable road users

Driven by COVID-19 and supported by an increase in cycle lane infrastructure, there has been an increase in the use of personal forms of transport for shorter journeys. With the threat of further periods of lockdown suppressing car usage, we anticipate a significant increase in vulnerable road users and an acceleration in adoption of more environmentally-friendly electrically-powered transportation solutions.  This will be echoed in an increase in demand for flexible and on-demand insurance policies. With current e-scooter trials set to conclude in summer 2021, expect to see legislative change to facilitate their wider adoption and likely regulation akin to electrically assisted pedal cycles.

Automated vehicles on the road in the UK in 2021

2021 is likely to see the first ‘automated vehicles’ on UK roads for the purpose of the Automated and Electric Vehicles Act 2018 despite widespread industry concerns about the level of advancement and capabilities of the underlying technologies. Driven by the government’s unwavering desire for a first use case in the wake of Brexit, expect automated lane keeping systems to be classified as automated, rather than driver assistance systems. 

Increase in consumer demand for different mobility solutions will lead to new types of vehicle hire and repair claims

The increasing demand for different mobility solutions will require credit hire organisations and representatives tasked with pursuing repair claims to adapt accordingly, presenting new challenges for insurers and lawyers involved in defending these cases. It will be important for compensators to look closely at the need to hire a replacement bicycle, for example. In addition, claims for the total loss of a bicycle may require additional scrutiny and corroboration by an expert engineer. Electric and hybrid vehicle basic hire rate information will also be harder to come by, at least initially. This challenge will however abate as hire companies start to increase their fleets of electric vehicles, and there are more electric vehicles on the road generally.

Solar and ‘vehicle to grid’ charging set to be tested in private and commercial vehicles  

We will see further testing of new electrical charging technologies in both the private and commercial vehicle markets as people strive to reduce fossil fuel consumption and running costs. Expect to see large commercial vehicle manufacturers trialling the use of solar panel clad trailer units to reduce fuel consumption for plug-in hybrid tractor units. At the same time, manufacturers of electric cars and light commercial vehicles (EVs) are expected to pilot ‘vehicle to grid’ charging in conjunction with energy suppliers. Such novel solutions will help to accelerate the adoption of EVs by enabling consumers to sell energy to the grid at peak times when the vehicle is not being used, and to charge it off peak when energy prices are lower. 

Savings in damages from technology will come

The increasing inclusion of the cost of new, often experimental, technologies within complex injury claims is significantly inflating claims. Environmental assistive technology, exoskeleton and mobility aids  generate eye-watering claims. Although the natural reaction is to resist, as little credit is given by claimants for potential cost savings that should follow, ultimately a large proportion of such claims will succeed where there is benefit for the injured person. We predict that although there is short-term claims inflation, focus will shift to highlighting how heads of loss are reduced, led by expert evidence.  It is important to balance resistance to the short-term claims inflation from the promotion of new technologies with the pursuit of longer term potential in savings.

A German perspective: fraud will go digital

Until now, sham theft of vehicles or vehicle parts was a worthwhile business for fraudsters. Due to travel restrictions and lockdowns it is now harder for thieves to transport their plunder to eastern Europe. Such offenders are likely to shift their activities to digital fraud. Examples include fictitious policyholders who conclude contracts via online platforms. In the UK we also predict an increase in ghost brokering where policyholders in difficult financial circumstances look for cheaper policies which are too good to be true. We expect those manipulating Google adverts to up their game to capture more business from unsuspecting policyholders who think they are contacting their insurers but are giving their business to fraudsters.


The changing global product safety landscape – new risks mean new liabilities

The General Product Safety Directive (GPSD) protects consumers by ensuring that only safe goods are sold in the EU. The Commission is currently reviewing the fitness for purpose of the current legislation in the light of new risks presented by artificial intelligence and connected technologies. It is likely that there will be a formal revision to the GPSD which will respond to issues related to new technologies and online sales channels; ensure more efficient market surveillance; and improve the effectiveness of product recalls.  Fundamental concepts such as the burden of proof and the definitions of ‘safety’, ‘product’, and ‘defect’ are being challenged, and there could also be knock-on effects such as revisions to the Machinery Directive which governs the safety of industrial machinery. While the revisions aim to address the risks stemming from new technologies while allowing for innovation, it remains to be seen where the balance will lie, at a time when it is essential that Europe is able to compete with the technological advances of China and the US. The global product safety landscape is changing – and new risks mean new liabilities.

Blockchain may be the solution for global supply chain management

As globalisation leads to unprecedented complexity, a recent report from the UK Government’s Office for Product Safety and Standards may provide the key to how manufacturers and those through the supply chain might verify the provenance of consumer products. First used to support the Bitcoin cryptocurrency, distributed ledger technologies such as blockchain are now receiving much wider interest from industries such as food and agriculture, healthcare and pharmaceuticals. It promises trust and transparency, efficiency and real time tracking and solutions to issues such as disruptions, delays and even fraud. There may however be practical issues around implementation, data inputting costs and vulnerability to cyber attacks. At a time when certifying ethical sourcing and wider traceability is so important, this could be a real breakthrough. Although this is a nascent market, the report cites stakeholders expecting mass market reach in the next five years.

All change with the Medicines and Medical Devices Bill

The Medicines and Medical Devices Bill will create a modern and safe medical regulation regime in the UK. From January 2021, changes to legislation on these issues will no longer flow through from updates at EU level. The legislation creates the structure for the UK Government to legislate for updates or changes to our existing laws on human and veterinary medicines, clinical trials, and medical devices. The Bill aims to strengthen patient safety by strengthening the powers of the UK’s medicines and medical devices regulator, the Medicines and Healthcare Products Regulatory Agency. It also aims to facilitate the sharing of information to support public health and the creation of mechanisms to track the use of medical devices or medicines against a patient record. The Government considers the new legislation will support its goal to empower what were only recently unimaginable medical innovations in treatment and diagnostics in areas such as biotechnology, artificial intelligence and robotics, which have huge potential to extend the quality and length of patients’ lives.  


Financial Advisers: increased use of technology following COVID-19 pandemic will leave financial advisers exposed

The COVID-19 pandemic has necessitated firms to act quickly to adapt their business to find technological alternatives to the traditional face-to-face advice model, especially for older and more vulnerable clients.  However, if financial pressures result in corners being cut, then we can expect to see mis-selling issues in the longer term. The rapid change in working practices caused by the COVID-19 pandemic will also have put pressure on systems and controls like anti money laundering checks, record keeping and confirmation of instructions and could give rise to data and privacy issues.

Technology professionals: 2021 will see more claims and contractual disputes for IT professionals

Technology is firmly in the spotlight as COVID-19 has increased pressure on IT systems to support homeworking and other forms of remote interaction. Dissatisfied customers may seek to threaten or pursue claims in negligence or breach of contract if their IT systems are not operating to their satisfaction. Equally, economic challenges and significant changes to operating conditions (including COVID-19 and Brexit) are likely to lead some companies which have already engaged IT professionals to reduce or delay IT project spend, resulting in an increased frequency of contractual disputes on on-going technology projects. 


Did I leave the oven on? Drones inside the home

Drones for aerial photos – check.  Drones for external surveillance and site visits – check.  Drones to go into dangerous locations – check.  But drones flying inside the home providing fully autonomous security surveillance?  Recently unveiled, 2021 promises this technological evolution. There are obvious security benefits for homeowners and their insurers, such as checking whether windows have been left open or the oven left on.  The drone can be triggered to fly and live stream to your phone either on demand or when a disturbance or intruder is detected. It can provide multiple views without multiple cameras.  Here is the internet of things in action. But there are issues too.  Privacy.  Also, practically, the noise of the drone may alert any burglar, enabling them to knock the drone out of the air. The “Always Home Cam” may seem poorly timed when we are already always home.  But when back at work, we might at least be able to check whether our puppies are happy!

Feeling hot, hot, hot

After another glorious summer of high temperatures and dry conditions, the spotlight falls on perils such as subsidence.  Subsidence caused by the close proximity of trees to properties is the only peril which is made worse by global warming but where the traditional response is to fell trees, thereby contributing to the exacerbation of global warming.  The answer cannot continue to be to remove trees.  What we will start to see is artificial intelligence being used more and more to improve the ability to risk profile areas and actively manage appropriate tree planting and effective tree maintenance.  A harmonious balance between trees in the urban environment and housing stock must be reached. 


Cyber war exclusions will require fresh thinking globally

The potential impact of state-sponsored cyber attacks against critical infrastructure has focused global attention on the need for up to date cyber war exclusions.  This reflects concerns that cyber war represents a systemic risk which the market should limit or exclude.  In the UK, the Lloyd’s Market Association is reviewing the prevailing war exclusion, NMA464, drafted long before cyber risk became a daily part of business life. This had been considered no longer fit for purpose even before the NotPetya incident in 2017.  Drafting the new exclusion has raised challenging issues, including the attribution of any attack, and debate is likely to rumble on, with many academic papers highlighting different possible solutions.  Accommodating the competing needs of insureds, insurers and reinsurer is unlikely to lead to a single clause being universally adopted.  Given the evolving nature of cyber risk, further clauses adopting different approaches, or adding further refinements, will be needed. 

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