Emerging Issues in Commercial Lines

Transcription

1 Emerging Issues in Commercial Lines Thursday, February 28, 2013, 9:50 a.m. Jeff DeTurris, CPCU Assistant Vice President ISO Insurance Programs and Analytic Services Jersey City, N.J. Jeff DeTurris is an assistant vice president with ISO s personal lines division. He is in charge of all aspects of producing and developing the company s personal lines rules, forms, and pricing products. Jeff is also ISO's point person on emerging issues. He facilitates the company s customer advisory panel on emerging issues and coordinates ISO s study of and responses to topics identified as important concerns for the future. Jeff began his career at ISO in 1981 as an analyst in ISO's personal property division, where he worked on product development. In 1996, he became manager of personal lines and was responsible for developing and implementing ISO's personal auto rules, forms, and pricing products. He also managed development and implementation of several new personal lines products, including the personal umbrella program, the personal auto liability/no-fault vehicle rating plan, and the nonstandard personal auto policy. Jeff holds a bachelor's degree in business administration from Adelphi University in Garden City, N.Y. He earned the CPCU designation in Session Description: Understanding emerging issues and their potential insurance implications is an important part of risk management for insurers. Topics such as autonomous vehicles, hazardous products, and carbon capture and storage all present potential new insurance exposures we should be prepared to handle. In this session, we will discuss these and various other emerging issues and the new exposures and underwriting concerns each presents.

2 Top Three Session Ideas Tools or tips you learned from this session and can apply back at the office

3 Emerging Issues in Commercial Lines Session Outline Overview Managing Emerging Issues Emerging Issues Topics Identification Screen and Monitor Emerging Issues Analyze the Issue Quantify and Prioritize Solar Storms Solar Flares and Solar Proton Events Effects of Solar Storms o Power Industry o Satellites o Railway Signaling Systems o Gas and Oil Pipelines o Interference With Telecommunication and GPS Systems Prior Solar Storms o 1859 The Carrington Event o 1989 Quebec Blackout o 2003 Halloween Storms Potential Exposures Counterfeit Products Counterfeit Construction Products Counterfeit Goods: Electrical Articles Potential Exposures Self-Driving Cars Existing Driverless Technologies On the Road Today Potential Exposures Other Exposures Food-Related Issues Hazardous Materials and Products Medical/Recreational Marijuana Cell Phone: Radiation Climate Change Artificial Intelligence Space Flight Questions & Answers

4 NAMIC Emerging Issues in Commercial Lines February 28, 2012 Agenda Managing Emerging Issues Discussion: Various Emerging Risks and Hazards Exposure Analysis Questions NAMIC Commercial Lines Seminar - DeTurris Page 1 of 19

5 Managing Emerging Issues Emerging Issues Topics Alternative energy fracking, solar, wind Artificial intelligence Car sharing Cell phone radiation Class action lawsuits Climate change Cyber security Counterfeit/hazardous products Economic downturn implications Food related issues Genetically modified organisms Green buildings Social media liability Litigation financing Medical/recreational marijuana Nanotechnology Self driving cars Space weather Supply chain vulnerability Water quality/scarcity NAMIC Commercial Lines Seminar - DeTurris Page 2 of 19

6 Identification Litigation Scientific studies Futurists Media reports Research papers Company Staff 5 Screen and Monitor Emerging Issues ISO s Focal point: Emerging Issues Panel US based Internationally based Enterprise Risk Management Emerging Risks Team Increased focus on emerging issues NAMIC Commercial Lines Seminar - DeTurris Page 3 of 19

7 Analyze the Issue Potential loss exposures Regulatory perspective International perspective Consider possible impact underwriting; claims; product development; potential litigation; pricing; financials/loss reserves Consider product changes Opportunities 7 Quantify and Prioritize Survey of ISO s Emerging Issues Panel members Respondents top Issues: Climate Change Food related issues Cyber security/social Hydraulic fracturing media Climate liability change Cyber security/social media liability Counterfeit/hazardous Nanotechnology products An insurer s top issues may depend on their size and market NAMIC Commercial Lines Seminar - DeTurris Page 4 of 19

8 Solar Storms Solar Storms Solar Flares and Solar Proton Events Coronal Mass Ejections Geomagnetic Storms 10 Credit: NASA 2013 NAMIC Commercial Lines Seminar - DeTurris Page 5 of 19

9 Solar Storms Solar storms are a regular occurrence High and low solar activity every 11 years Recent press attention is the result of the approaching maximum solar cycle Loss exposure potentially increases with the use of sophisticated technology 11 Effects of Solar Storms 12 Credit: NASA 2013 NAMIC Commercial Lines Seminar - DeTurris Page 6 of 19

10 Effects of Solar Storms Power industry Risk of a cascading grid collapse Damaged transformers Satellites Satellites can be reprogrammed Reversal of polarities Vital electronics can short circuit 13 Effects of Solar Storms Railway Signaling Systems Derailment and collisions Gas and Oil Pipelines Corrosion and leakage Interference with telecommunication and GPS systems May cause aircraft to be diverted from regular routes NAMIC Commercial Lines Seminar - DeTurris Page 7 of 19

11 Prior Solar Storms 1859 The Carrington Event Largest solar storm ever recorded Northern Lights could be seen as far south as Cuba, and night time skies in New York were bright enough to read Damage to several telegraph stations Operators received shocks 1989 Quebec Blackout Massive GICs caused electrical spikes across the grid Portion of grid failed 2 transformers damaged Power stayed off for 9 hours 15 Over $2 billion in estimated damages Prior Solar Storms 2003 Halloween Storms Blackouts in Sweden 14 transformers damaged in South Africa, loss of 13% of the power grid More than 30 satellite anomalies reported, one being a total loss Credit: NASA NAMIC Commercial Lines Seminar - DeTurris Page 8 of 19

12 Potential Exposures 17 Business interruption Power utility service interruption First party property damage Damage to transformers Damage to satellites and electronic equipment Third party liability Environmental damage from corroded or leaky pipes Counterfeit Products 2013 NAMIC Commercial Lines Seminar - DeTurris Page 9 of 19

13 Counterfeit Construction Products Counterfeit building materials Use of Internet for commerce and equipment sourcing Includes counterfeit items Appear legitimate Steel, valves, pipe, circuit breakers, electrical parts, pipe fittings, lift cranes Incubation period 19 Counterfeit Goods: Electrical Articles Consumer safety and critical technology seizures in US increased by 44% in 2011* Electrical articles = 17% of all consumer safety and critical technology seizures* Unknowingly used in manufacturing, military, critical infrastructure, and consumer product applications 64% of counterfeit electrical products in US are purchased from legitimate shops and retailers (US Chamber of Commerce estimate) *Source: US Customs and Border Patrol NAMIC Commercial Lines Seminar - DeTurris Page 10 of 19

14 Potential Exposures Fail independent certification testing Fire Shock Explosion Poor performance and efficiency Cost production time Reputational risk 21 Potential Exposures Bodily injury Health and safety issues associated with counterfeit products Property damage Damage to property resulting from counterfeit goods Product recall Recall of companies product as a result of counterfeit goods in supply chain NAMIC Commercial Lines Seminar - DeTurris Page 11 of 19

15 Self Driving Cars Self Driving Cars Cars that use artificial intelligence, sensors and global positioning system coordinates to drive themselves No active intervention of a human operator Automotive manufacturers have developed and begun testing autonomous driving systems NAMIC Commercial Lines Seminar - DeTurris Page 12 of 19

16 Existing Driverless Technologies Electronic stability control Helps prevent skidding and rolling Pre collision warning systems Prepares brakes if imminent crash detected Pedestrian detection Brakes can be applied if someone steps in front of vehicle Active cruise control Automatically slows vehicle to maintain safe following distance Autonomous steering Guide car back into center lane if car is drifting Cars that can parallel park themselves 25 On the Road Today Google s self driving car Fleet of about 12 self driving cars on the road any given day More than 300,000 miles of testing No accidents to date Legislation Self driving cars are legal in: Nevada Florida California Source: Nevada Department of Motor Vehicles NAMIC Commercial Lines Seminar - DeTurris Page 13 of 19

17 On The Road Today Source: Nevada Department of Motor Vehicles 27 Potential Exposures Expensive to repair Integration with existing vehicles Dependent on satellite maps Must be constantly updated Satellite outages/disruptions? Dependent on infrastructure Who is liable? Does no driver = no driver negligence? Does liability shift to manufacturers, municipalities? NAMIC Commercial Lines Seminar - DeTurris Page 14 of 19

18 Potential Exposures Lack of human judgment Malware/Hacking Insurability: What does the future bring for auto insurance? 29 Food related issues Recent lawsuits filed against food manufacturers Allegations of false marketing Food package labeling all natural Arsenic in rice (baby cereal, bread, snacks) Inorganic arsenic is carcinogenic to humans Source: insecticides and fertilizers Food fraud NAMIC Commercial Lines Seminar - DeTurris Page 15 of 19

19 Hazardous Materials and Products Coal combustion residue, fly ash Contains toxins Component in drywall, parking lots, roads, golf courses Diacetyl Workers and consumers $7 million in damages awarded to consumer Manufacturer and grocery chain liable 31 Medical/Recreational Marijuana Dispensaries distribute marijuana for medical reasons in certain states Colorado and Washington legalized certain possession of marijuana States considering development of a market Packaging, labeling, inspections, number of growers, processors, stores State regulation vs. prohibitions in the Federal Controlled Substances Act Employee use of marijuana at work NAMIC Commercial Lines Seminar - DeTurris Page 16 of 19

20 Cell Phone: Radiation 2012 Ruling: Italy s highest civil court Concerned disability payments to a businessman Excessive phone use brain tumor Interphone and other studies Court reportedly relied on study from Sweden, not funded by the cell phone industry 33 Climate Change Cap and Trade California is the first state to charge industries for greenhouse gases they emit, effective Sets overall ceiling on allowable emissions Assigns portion of allowable emission amounts to individual polluters Other emissions are auctioned off Carbon capture and storage Technology that strips CO2 from smokestacks CO2 is buried under ground Potential induced seismicity concern NAMIC Commercial Lines Seminar - DeTurris Page 17 of 19

21 Artificial Intelligence Computers simulate human thought Increased computer power Improved speech recognition software Computer generated decisions Software creators, product manufacturers, hardware manufacturers, installers, chip makers Facial detection and recognition software Billboards, advertising Future technological capabilities 35 Space Flight Commercial entities may begin to open up access to space for the public California Spaceflight Liability and Immunity Act Provides liability protections for compliant entities for spaceflight participants acknowledging the risks and sustaining injury Similar laws in FL, VA, NM, TX NAMIC Commercial Lines Seminar - DeTurris Page 18 of 19

22 Questions 37 Contact Information Jeff DeTurris, CPCU Assistant Vice President ISO Insurance Programs and Analytic Services 545 Washington Blvd. Jersey City NJ (201) No part of this presentation may be copied or redistributed without the prior written consent of ISO. This material was used exclusively as an exhibit to an oral presentation. It may not be, nor should it be relied upon as reflecting, a complete record of the discussion NAMIC Commercial Lines Seminar - DeTurris Page 19 of 19