Five New Business Insurance Products You Might Need
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Insurance may not be big box office, but in the real world of business, managing future risk is not something you can afford to overlook. Let’s take a look at some areas in which business insurance is likely to have to change in order to provide appropriate cover over the coming decade, and assess what they will mean for your business.
1. Driverless car liability insurance
In 2016, as part of its New Horizons report, Willis Towers Watson asked 200 insurers if they thought self-drive technologies would have a major impact on the industry. Of the 72% that said yes, 79% felt that the impact would be felt over the next one to seven years.
Cars have become much safer over the last 50 years and driverless cars should improve safety further, by removing humans from the equation. The US Department of Transportation estimates that 95% of car crashes are the result of human error; therefore, we should see the cost of traditional car insurance fall. But as with all new technology, there are many unanswered questions. Software bugs, programming defects, hardware failures and cyber terrorism are all threats that could sabotage the utopian world of driverless vehicles. And then what? Who will be liable? The user? The manufacturer? The programmer? The network provider? The authorities?
There is a trend towards manufacturers assuming greater ownership of the whole package, and thus assuming full liability for insurance. Companies like Tesla and Google have models whereby they maintain ownership by providing cars for ride-sharing services. In the UAE, for example, Tesla is set to provide 200 cars for an autonomous taxi service. But any company that owns a fleet of driverless cars is likely to be at least partially responsible for their safe running. The evolution to full automation will be gradual. Expect the transition to full automation to be carefully monitored by insurers through telematics. By 2020, it is predicted that approximately 50% of cars in the US will use telematics to monitor driving behavior.
What you can expect: A drop in premiums for traditional car insurance as more driverless technology is implemented and more pay-as-you-drive policies come to market. Product liability insurance for companies providing the cars or providing parts for the cars is likely to rise, though.
2. Cyber security insurance
By exploring driverless car liability, I’ve raised a couple of issues that will impact most businesses. One is the need to insure against hacking, cyber theft and misuse of data. While cyber security insurance does already exist, many businesses are yet to grasp its importance.
The 2017 Willis Towers Watson Cyber Risk Survey found that 42% of 92 US companies and 50% of 71 UK companies had insufficient cybersecurity insurance. Yet the UK government estimates that in 2014, 81% of large UK businesses and 60% of small ones suffered a cyber security breach.
With new legislation, led by the European Union’s General Data Protection Regulation (coming into force on 25 May), demanding greater responsibility over the collection and storage of personal data and imposing heavy fines for failure to comply, businesses will need to cover themselves against the potentially crippling costs of a data breach.
What you can expect: The demand for cyber security insurance to surge over the next few years, especially with smaller companies and startups. Businesses should get ahead of the game and begin assessing their own cyber security risk, data collection policies and insurance coverage.
3. Artificial intelligence/robotics liability insurance
Driverless vehicles also raise the issue of liability when employing artificial intelligence (AI) and robotics. There are plenty of things that can go wrong with a machine that relies on sensors and network connections. To further complicate the matter, AI is a new type of risk for the insurance industry and one that is not very well understood. As such, each insurance policy, at least within a particular business area, is likely to be built on a case-by-case basis, according to criteria such as:
• Is the role of the robot industrial, service or medical?
• Does the robot replace humans or complement them?
• Is the robot restricted to one place (e.g., vacuum cleaner) or multiple locations (e.g., delivery drone)?
• Can a human choose to override the actions of the robot?
• Does the robot use AI, so have the potential to develop individual thought?
A hugely complicated example is a prosthetic limb that is part robot-controlled, part human-controlled. Where does the liability lie here? Even if your company doesn’t rely heavily on robots or AI, be aware that it can affect other insurance policies as well. Health insurance is a prime example. Robots are becoming commonplace in surgery all around the world, including in the Middle East, and currently health insurance usually covers their use. For example, the manufacturers of the Da Vinci surgical robot state that it is ‘categorized as robot-assisted minimally invasive surgery, so any insurance that covers minimally invasive surgery generally covers Da Vinci Surgery.’ But as the machines become more and more complex, this will need to change. In theory, such complexity should lower premiums because of greater accuracy, but in the early days we may see an increase because it is a step into unknown risk.
What you can expect: More and more products covering AI/robotics, or adaptations to current liability insurance, as businesses become more and more reliant on these technologies. Health insurers will need to provide clearer guidance on the use of surgical robots and offer policies that include or exclude their use. Employers should consider approaching providers or their broker to better understand what it could mean for their policies.
4. Nanotechnology liability insurance
Nanoparticles are microscopic particles (100nm or less– thinner than a human hair) that can enter the cells of a living organism. Nanotechnology is predicted to bring advances in medicine –drug delivery, pathogen detection, monitoring and tissue engineering, for example– as well as construction, clothing, make-up and even the food we eat. Research by the University of Limerick in 2014 revealed nanotechnology to be a real concern for the insurance industry and scientific experts alike. In a questionnaire submitted to 31 insurers and 39 nanotechnology experts, they found that 60% of experts and 32% of insurers believed nanomaterials posed high risk to workers.
If, as with other harmful substances like asbestos, nanomaterials turn out to cause long-term health risks, it’s likely that liability will lie with the creator of the product. But what of a business that enforces the use of a nanomaterial –say a protective vest– as part of a worker’s day-to-day life? In this case, companies would be well advised to adapt their own employer liability insurance to cover potential claims many years down the line.
What you can expect: The insurance industry struggling to decide the level of risk nanotechnology presents, due to all the unknowns. Employers should monitor their own uptake of these materials and adjust their own liability insurance to suit.
Although this is unlikely to be a standalone product, but instead a rider on a personal insurance or company insurance policy, wellness is still something that may crop up in the future of business insurance and liability. If companies can be fined for failure to protect personal data, it’s not unreasonable to suggest that governments could start imposing similar penalties for failure to protect personal wellness. Perhaps employees could start suing their current or former employers due to a lack of provision/not enough warning of the risks to health due to long periods of inactivity. In the future, could an employer be liable for damages due to poor health as a result of stress, inactivity, standing too long, sitting too long? These are all possibilities.
Health and fitness is a hot topic, as governments come under pressure to lower their national healthcare burden. Wellness programs at work are a key driver for improving the general health of the population, putting the responsibility on businesses for promoting good health among their employees. Given that many companies already have pollution liability insurance, because of their potential to cause environmental damage, it’s not hard to imagine insurance being required for businesses causing societal damage too, through inactive or stressed members of the community becoming more commonplace and not providing a positive contribution to society.
What you can expect: Governments beginning to impose harsh fines on companies whose employees adopt unhealthy lifestyles. A far better answer than ‘wellness liability insurance’ is likely to be the adoption of well implemented wellness programs but, as with data protection insurance, it’s wise to be covered for things beyond your control.
Keep assessing your risk and liability
While the sci-fi writers overlooked the dramatic impact of an insurance assessment, in the real world failing to assess future risk and liability could lead to dramas you can ill afford. The world is forever changing and keeping ahead of the risk that it brings is a sure-fire way to help your business reach for the stars.