Connected devices are transforming our lives, and our risk landscape. As some risks are eradicated, new concerns are coming to light. We sat down with AIG’s David Ho to discuss how insurers must adapt.
HOW ARE INSURERS ADAPTING TO THE NEW RISKS OF 5G?
To respond to these trends, insurers are actively assessing the risks of transition to a 5G world and partnering with clients. For example, AIG has worked with several manufacturing companies who are exploring the potential of 5G to optimize manufacturing processes.
This includes moving to “Industry 4.0”, in which smart factories are leveraging connected technologies such as industrial robots and smart software to drive more efficient and automated manufacturing processes.
Further, the growth of cyber insurance will continue given the dramatic increase in exposure as more devices come online. The potential for data theft and integrity is highly in focus; increasingly more insurers will assess the potential for other types of damage including bodily injury and property damage from the failure of 5G technology.
Insurers are also exploring the potential for liability shifts as accidents move away from ‘human’ or ‘driver’ error into the realm of ‘machine’, ‘software’, or ‘algorithm’ error. It is likely that software errors and omissions coverage will grow in importance and size as liability will emerge when technology fails.
HOW WILL 5G CHANGE THE RISKS ASSOCIATED WITH SOCIAL LICENCE TO OPERATE?
Data privacy and security has taken a prominent role in recent regulatory and consumer discussions. This relates to a number of large data privacy events and concern over the types and volume of data collected, stored and used by companies.
This trend has led to more stringent data regulatory requirements, including GDPR in Europe and CCPA in California, US. We expect that these regulatory requirements will continue to advance as more governments and regulators adjust to the new data-rich industrial landscape.
Further, companies will continue to be challenged by managing the multitude of regulatory requirements in all of the markets in which they operate.
Increasingly, companies will be required to go beyond regulatory compliance and provide transparency on the types of data collected, how they are used, stored and protected.
As technology becomes more and more embedded into critical life-impacting processes such as medical procedures and transportation, the risks need to be aggressively managed to foster widespread acceptance and adoption.
WHAT ARE THE POTENTIAL DISRUPTIONS ASSOCIATED WITH 5G?
It is quite clear that we will become more and more dependent on connected devices. This is already evident in our reliance on digital banking and ATMs, GPS-enabled navigation tools and voice-assisted technology for ordering consumer products. A 5G world will be characterized by even greater reliance on connected technology, and most importantly, in areas that are critical to human health and safety.
On one hand, the rise of autonomous vehicles will usher in an era of much safer roads as human error will be dramatically reduced. On the other, the potential for system outages or breakdowns, either accidental or purposeful, could lead to significant systemic disruption and/or injury.
It is not difficult to imagine a scenario in which the technology that supports autonomous vehicles fails – either accidentally or purposely – leading to widespread transportation disruptions or even accidents. The incidence of these events should be expected and will emerge as more connected devices are brought online.