Category Archives: Technology

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.

Small Business Insurance Is Going Digital

The way in which small business owners buy insurance is changing, as the number of ventures owned by Millennials/GenXers increases.

Up to 25 percent of total small business insurance premium could be digitally underwritten by 2020, Willis Towers Watson Securities reports.

“Small businesses are expected to grow an average of 6 percent annually through 2020, at which point over 60 percent of businesses are expected to be owned by Millennials/ GenXers who are much more likely to favor digital management of insurance coverages.”

Traditional insurers are embracing new technologies, both by creating proprietary platforms and partnering with small business insurance distribution focused start-ups.

Here are some recent examples of digital innovation in the $100 billion small business insurance market, via Willis Towers Watson Securities inaugural Quarterly InsurTech Briefing:

Whether a start-up or an established company, disruptions can devastate a business. Small business week is the perfect time to tune up your insurance coverage, the I.I.I. says.

North American Insurers Lead In Tech Spending

North American insurers lead the way in IT spending globally and will invest $73 billion in tech areas such as data analytics, cloud, and insurtech in 2017.

Digital Insurance reports that global IT spending by insurers is slated to reach $185 billion by the end of this year, according to the Celent “IT Spending in Insurance 2017” report.

After North America, insurer technology spending by region is as follows: Europe ($69 billion); Asia ($33 billion); Latin America ($5 billion); then a group of territories comprising Africa, the Middle East and Eastern Europe (around $5 billion collectively).

Three overarching trends – digitalization, data analytics, and legacy and ecosystem transformation – still dominate investment, Celent said.

“In a few markets globally, we have seen a slight reduction in IT spending this year. Generally, the more mature markets remain under pressure to demonstrate value through efficiency,” said senior vice president Jamie Macgregor.

Selfies And Life Insurance

Today’s selfie may already be posted on Instagram, but consider this: one day it could be part of your application for life insurance.

NerdWallet reports that several life insurers are testing technology that uses facial analytics and other data to estimate life expectancy.

The tech company in focus, Lapetus Solutions, says its product Chronos, would enable a customer to buy life insurance online in as little as 10 minutes without taking a life insurance medical exam.

NerdWallet explains that state regulatory approval would be required for an insurer to be able to use Chronos in the underwriting process. Once approved, here’s how it would work:

“You’d upload a selfie to the insurer online and answer health and other questions. The facial analytics technology would scan hundreds of points on your face and extract certain information, including your body mass index, physiological age (in layman’s terms, how old you look) and whether you’re aging faster or slower than your actual age.”

The facial analytics angle is just one example of how life insurers are exploring the use of data, statistical models, artificial intelligence and other innovative techniques in their business.

Time and testing will tell which new approaches prove effective, says Robert Kerzner, president and CEO of LIMRA: “This one may or may not meet the vetting process to make carriers comfortable.”

What do you think?

Check out I.I.I. facts and statistics on life insurance.