Category Archives: Technology

InsurTech disruption: threat or opportunity?

Whether you’re an InsurTech startup with new ideas or an incumbent concerned about protecting your book of business, the greatest risk you can take may be to resist collaboration, according to a post on Willis Towers Watson Wire.

In Threat vs Opportunity? InsurTech is largely a matter of perspective, Andrew Newman, president and global head of casualty at Willis Re, says while it’s understandable that many insurers have perceived InsurTech as a threat to the value chain, the biggest threat lies not in technology itself, but in competitors of any description leveraging these innovations to gain advantage by reducing risk and lowering costs.

“The plain fact is that the vast majority of InsurTech companies aren’t interested in going to war with incumbents. Their focus is on creating value within the insurance value chain – not collapsing it. So if incumbents embrace ‘disruption’, rather than concentrating on defending themselves by keeping these opportunities at arm’s length, then they will find that the available technology is largely complementary to most of the current processes in the industry.”

Download the presentation Insurance: Leading Through Disruption by Insurance Information Institute president and CEO Sean Kevelighan to find out more about how the industry is poised to lead through disruption.

A smart fish tank leaves a casino’s data exposed to hackers

The cyber savvy have heard of phishing – sending thousands of malware-laden emails hoping for one unsuspecting click – but the Internet of Things introduced a new kind of fishing. It involved actual fish.

An internet-connected fish tank in a North American casino was used as an initial entry point into the casino’s network. This is one of nine examples of unusual attack vectors listed in a recent report from the security firm Darktrace. This report contains nine real-world examples where sophisticated methods, advanced technologies, or unusual strategies were employed.

The report warns that “…we are seeing new areas of vulnerability arise as modern companies embrace the ‘Internet of Things’. The proliferation of new connected objects multiplies the inroads to critical networks and data, yet organizations often have remarkably poor visibility of these hidden outposts of their networks. ”

In addition to the threat posed by “things”, the increasing digitization of everyday work processes means that legitimate network users can (accidentally) expose data and systems to significant vulnerabilities.

Another growing security concern is that the automation of malware production means that attackers can spread malicious software at lightning speed, outpacing the efforts of human security teams to identify and block new variants of threats.

I.I.I.’S CEO TESTIFIES BEFORE CONGRESS ON TECHNOLOGICAL INNOVATION IN THE FIGHT AGAINST INSURANCE FRAUD

Sean Kevelighan, the I.I.I.’s chief executive officer told a U.S. Senate Subcommittee in Washington, D.C., today that U.S. auto, home and business insurers pay an estimated $30 billion annually —nearly 10 percent of their total claim payouts—in fraudulent auto, home, and business insurance claims. To combat fraud insurers are increasingly turning to vendors who offer technological innovations stemming from big data and artificial intelligence. These vendors are allowing insurers to assess prospective customers, verify claims and identify suspicious activity in ways that were not previously possible.

In a report released last month, the Boston-based Aite (pronounced EYE-TAY) Group outlined the fact that insurers are recognizing their fraud-fighting efforts must adapt to this new era, and found reason for optimism. The Aite Group reports insurers are retaining state-of-the-art vendors, like data aggregators, producers, and receivers and then analyzing this data through the use of artificial intelligence and predictive analytics. The result? Insurance companies are equipping themselves with the high-tech tools they need to assess a prospective customer, verify a claim, and identify suspicious activity.

Click here for the full testimony.

Autonomous ships are coming

You’ve heard about self-driving cars, but what about autonomous ships?

Fortune Tech reports that the world’s first autonomous cargo ship, to be christened the Yara Birkeland is expected to start sailing in 2018, initially delivering fertilizer along a 37-mile route in southern Norway.

“The ship, according to the Wall Street Journal, will cost $25 million, about three times as much as a conventional ship of similar size, but will save up to 90% in annual operating costs by eliminating both fuel and crew.”

Analysis by Allianz Global Corporate & Specialty (AGCS) shows that human error accounts for approximately 75 percent of the value of almost 15,000 marine liability insurance claims studied over five years, equivalent to over $1.6 billion.

From the AGCS Safety & Shipping Review 2017:

“Autonomous vessels could improve maritime safety and revolutionize movement of cargo on a scale not seen since containerization.”

Check out Insurance Information Institute facts & statistics on marine accidents.

How do ransomware attacks impact cyber insurance loss ratios?

Another global ransomware attack, dubbed Petya, has disrupted operations at major firms across Europe and the United States.

More than 100 companies and organizations across various industries were affected, including shipping and transport firm AP Moller-Maersk, advertising firm WPP, law firm DLA Piper, Russian steel and oil firms Evraz and Rosneft, French construction materials company Saint-Gobain, food company Mondelez, drug giant Merck & Co, and Pennsylvania healthcare systems provider Heritage Valley Health System.

Today’s Insurance Information Institute Daily, via The Wall Street Journal, reports that the attack has exposed previously unknown weaknesses in computer systems widely used in the West.

The U.S. cyber insurance market grew by 35 percent from 2015 to 2016, based on recent reports.

From A.M. Best: U.S. property/casualty insurers wrote $1.35 billion in direct written premium for cyber insurance in 2016.

Overall, cyber insurance for the majority of companies was profitable and the direct loss ratio decreased by 4.5 percentage points to 46.9 percent in 2016, from 51.4 percent in 2015.

Ransomware attacks are part of the reason for the decline in the loss ratio, A.M. Best explains:

“The decline in direct loss ratio for 2016 is partially attributed to the majority of reported cyber-attacks being related to ransomware heists. In almost all ransomware cases, the losses were well below the deductible and a simple backup recovery resolved and remedied any negative long-term effect of the attacks.”

Read our earlier post on insurance for ransomware attacks.

Public release of Tesla Autopilot accident report

Insurance Information Institute (I.I.I.) chief actuary James Lynch and I.I.I. research associate Brent Carris share insight on the Tesla Autopilot accident report:

The National Transportation Safety Board (NTSB) released 500 pages of documents on last year’s fatal Tesla Autopilot accident in Florida. Per the initial press release the report contains only factual information on the investigation including highway design, vehicle performance, human performance, and motor carrier factors.

In an email newsletter he writes, autonomous vehicle expert Alain Kornhauser (Princeton University) raised some questions and concerns regarding the report. Those include:

  1. Since lateral control (swerving) couldn’t have avoided this crash (the truck is almost 70 ft long (6 lanes wide) stretching broadside across the highway) , it doesn’t matter if Josh Brown ever had his hands on the steering wheel. That’s totally irrelevant.
  2. Why didn’t autobrake kick in when the tractor part of the tractor-trailer passed in front of the Tesla?
  3. How fast was the truck going when it cut off the Tesla? I couldn’t find the answer in 500 pages.

The full 500 page report is also available to view at NTSB: Docket Management System.

Will your baby need to learn to drive?

“They’ll be driving soon,” a friend said recently when I sent him a photo of my two young sons. “Hoping car will do that,” I responded, only half-joking.

But if you think about it, we may not be so far from that scenario and insurers are among those saying sooner, rather than later for self-driving cars.

From across the pond, this:

“Babies born today may never have to take a driving test.”

Axa UK’s chief executive Amanda Blanc told The Telegraph that autonomous vehicles could be on the roads within 15 years.

In preparation Ms. Blanc said it is crucial for the insurance industry to build a framework for what happens in the event of a car accident that is caused by a computer, rather than a human.

“Driverless cars will not be able to take to the roads [without that],” she added.

Insurers know that new technology, particularly the rise of autonomous driving, will drive a big shift in liability claims and they are preparing accordingly.

For example, in our earlier post we reported that Allianz has already started building teams of engineers with experience in automotive and driverless technology.

The Trump administration is set to unveil revised self-driving guidelines within months, according to this Reuters report.

Despite advances in safety, the impact of collision/crash, particularly motor-related, is the main driver of liability loss activity in the United States, according to Allianz’s latest global claims review.

Check out the I.I.I. issues update Self-Driving Cars and Insurance.

How to protect crops and property from hail

Damage to vineyards following several years of severe hailstorms in the famed wine-growing region of Burgundy, France, is prompting greater prevention efforts.

London’s Daily Telegraph reports that producers are protecting their entire grape harvest with a cloud-seeding system—a hi-tech hail shield that is designed to modify storm clouds and suppress hail formation.

The system works by releasing tiny particles of silver iodide into the clouds where they stop the formation of hail stones, thereby reducing the risk of damage.

Cloud-seeding, or weather modification, has been used for many years in parts of the United States and Canada not just to suppress hail, but to enhance rainfall and snowfall in some cases. Insurers are involved in the research.

This makes sense. According to the National Oceanic Atmospheric Administration, hail causes approximately $1 billion in damage to crops and property annually.

A monster hailstorm that pounded Colorado’s Front Range on May 8 is on pace to be Colorado’s most expensive insured catastrophe, with an estimated preliminary insured loss of $1.4 billion, according to the Rocky Mountain Insurance Information Association.

For auto, home and business owners living in hail-prone areas, taking steps to minimize hail damage to property is essential.

The Insurance Institute for Business and Home Safety (IBHS), is continuing a major multi-year research study into hailstorms. IBHS resources on preventing property losses are available here.

Ransomware: Does Cyber Insurance Make Sense?

As organizations look to recover from the disruption caused by Friday’s massive global ransomware cyberattack, the value of cyber insurance, and other cybersecurity tools, just multiplied exponentially.

Security researchers at Kaspersky Lab recorded more than 45,000 attacks in 74 countries including the UK, Russia, Ukraine, India, China and Italy, the Guardian reports.

The UK’s National Health Service, French car manufacturer Renault, and Spain’s telecommunications giant Telefonica were among those hit by the so-called WannaCry ransomware, which locks up computer systems until the victims pay a ransom.

Cyber risk modeling firm Cyence estimates the average individual ransom cost from the attacks at $300, and the total economic costs from interruption to business at $4 billion, according to this Reuters report.

Kevin Kalinich, global head of Aon’s cyber risk practice, told Reuters:

“If you’re a hospital that turned away patients, if you’re a global delivery company that can’t send a package, or a telecom company in Spain, Russia or China, the financial statement impact from the business interruption is much larger than the $300 ransomware.”

Insurance coverage for ransomware (see earlier post), and other forms of extortion, is available under cyber insurance policies, or other types of policies that specifically cover cyber extortion.

An insured’s ransom payment following an attack is typically covered, subject to individual policy terms and conditions, according to this I.I.I. white paper.

Cyber policies also provide coverage for the costs of forensic investigation, restoring lost or corrupted data, legal expenses and business interruption.

Here are some of the considerations that go into the decision to purchase coverage.

Where To Go For Small Business Cybersecurity Advice

Small businesses are increasingly vulnerable to cyberattacks. A new website launched by the Federal Trade Commission (FTC) is aimed at helping small business owners be better prepared.

The site – ftc.gov/SmallBusiness – is a one-stop shop where small business owners can find information to protect themselves from scammers and hackers, as well as resources they can use if they are hit with a cyberattack.

Online FTC resources include a new Small Business Computer Security Basics guide with information to help companies protect their files and devices, train employees to think twice before sharing the business’s account information, and keep their wireless network protected, as well as how to respond to a data breach.

Specific information on ransomware and phishing schemes targeting small businesses is also provided.

According to the U.S. Small Business Administration, there are more than 28 million small businesses nationwide, employing nearly 57 million people.

Cyberattacks can be particularly damaging to small businesses, and many lack the resources that larger companies have to devote to cybersecurity.

For example, the percentage of spear-phishing attacks targeting small business rose from 18 percent to 43 percent between 2011 and 2015.

Insurance is one of the ways in which small businesses can protect themselves. See I.I.I. resources on cyber liability risks.