Ties Liability in Knots The same technologies
that are driving
business forward are
upending the nature
of loss exposures
and presenting new
By Michelle Kerr
Intelligent technologies are driving a shift in risk that claims adjusters and underwriters will need to come to terms with.
Despite dire predictions of an “Automation Apocalypse,” it turns out hat automation has only obliterated one job in the last 60 years. (Sorry, elevator operators.) However, the steady encroachment into the workplace of automation, robotics and cutting edge technologies is all too real. Robots aren’t just making cars and
widgets and filling warehouse orders. They’re harvesting crops, flipping
burgers, making pizza and folding laundry — just for starters.
For businesses, the potential boons are obvious: reduced labor and operational
costs, reduced turnover and fewer injuries from repetitive tasks, increased overall
safety, production speed and quality. Some economists project that current trends
will eventually lead to lower prices and increased demand.
Unfortunately all of that silver lining isn’t without its dark clouds. The
potential risks are evolving just as fast as the technology itself, and both insurers
and insureds will be hard-pressed to keep up. Questions of liability and coverage
and product response are becoming increasingly murky.
Yesterday’s loss scenarios were more or less straightforward. If a truck fails
to brake and the resulting crash causes a loss, where does the liability lie? The
operator? The truck manufacturer? The brake manufacturer? There might be
disputes over fault, but at least the possibilities were limited.
Now you have the same crash in an autonomous truck and the questions can
make your head spin. Was the circuitry at fault? A chip? Was there a fault in the
programming? Was there a connectivity issue? Was it hacked? Did the machine
choose not to apply the brakes because of a specific set of circumstances presented?
Having a confluence of factors contributing to losses is not anything new in
the insurance industry said Gail McGiffin, principal in the EY insurance practice
and leader of underwriting, product, policy and billing solutions. What is new
“is the breadth of everything that technology touches these days,” she said. The
result being that you’re no longer talking about the combination of one or two
technologies, it may be more like five technologies or more contributing to the
complexity of an exposure.
“You have to think about some of these emerging technologies — that
combination of artificial intelligence with machine learning, with semantic web,
with predictive models — all being in operation,” she said.
“Dissecting the exposures introduced by individual technologies is challenging
enough but understanding the compounded effect of this multitude of
technologies and how it’s contributing to exposure and product response — that is
the next major challenge area that we’re facing in the industry.”
If a piece of equipment has embedded intelligence, “whether it’s analytics,
whether it’s robotic process automation, whatever the case may be — there’s
a shift of liability that’s tacit and implicit inside of the underlying product or
service,” agreed John Lucker, principal and global advanced analytics market
leader with Deloitte & Touche.
What’s unclear at the moment said Greg Hendrick, president of property &
casualty insurance and reinsurance at XL Catlin, “is how it’s all going to come
together when you actually have something unfortunate happen — who’s going
to pay what? That’s the interesting thing about this emerging risk: What normally
was perceived as a usual course of action for liability could shift as you see more
and more technology, more and more autonomy, enter your vehicles and your
DIVVYING UP LIABILITY
For all parties connected to a loss, the challenge will be not only trying to
sleuth out the root cause, but then teasing out an answer to the question of whose
policy, and which line will respond to the loss.
Let’s say a programming error created a serious security flaw in one piece of
software operating a fleet of autonomous industrial vehicles or machines. A hacker
exploited the flaw and caused the entire fleet to unexpectedly halt, rendering every
unit permanently inoperable.
Multiple crashes arose from the unexpected stalls as well as significant business
“From the insurance side of
this, I think the biggest risk
is that they just don’t know
what the risks are.”
—John Lucker, principal, global advanced
analytics market leader, Deloitte & Touche