3D Risks

3D Printing Offers New Risk Challenges

Revolutionary 3D printing processes offer known and unknown risks.
By: | March 17, 2014 • 3 min read
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As commercial 3D printing advances from occasional to routine use, the product liability landscape will shift around it. Defective and counterfeit product exposures, among others, will arise for all participants along the manufacturing continuum, industry experts said.

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In an adverse incident, said Rob Gaus, product risk leader, Marsh, liability will be apportioned among participants in the manufacturing and distribution stream: product manufacturer, printer manufacturer, software designer, feedstock supplier, distributor (especially if it modifies the product) and retailer (if the manufacturer is not well capitalized). No case law exists yet.

In 3D printing, a computer sends the software containing a product design to one or more printers, which builds the product, layer by layer, from many kinds of materials — plastics, metals, drugs, paints and even human tissue.

David Carlson, U.S. manufacturing and automotive practice leader, Marsh, said 3D-printed products are treated the same as any other new operation that poses new risks.

Underwriters and brokers must first assess the company’s risk management profile and risk appetite. When production, research and development teams look at technology, “they should loop in risk management. Risk management should be part of the continuum, or the company could get into sticky situations.”

The emerging risks include unregulated manufacturing, said Mark Schonfeld, a partner at Burns & Levinson LLP in Boston specializing in business and intellectual property law.

If 3D printing enables production of, say, just 100 hip implants or 100 hearing aids, such work will generally take place outside of a traditional mass-production factory, which is subject to government regulation and inspection.

“Insurance companies like FDA oversight of manufacturing because it makes products safer and helps identify responsibility when things go wrong,” Schonfeld said.

To protect themselves and their clients, Schonfeld advises insurers to keep abreast of technological developments, consult with a creative and knowledgeable attorney about how to address liability exposure, and adjust existing policies to be fair to consumers and prevent injury to the insurance company.

3D printing also raises the risk of counterfeit products, said Peter Dion, line of business director-product liability, Zurich Insurance. The digital “recipe” in the software design, and is vulnerable to capture, he said.

Although there is no encryption mechanism for the software, one solution might be to transfer the digital file in pieces only as they are needed by the printer to prevent capture of the entire design signature, Dion said.

Manufacturers have always struggled with counterfeit products, but 3D printing magnifies the risks because it can slash the time from product development to market-ready product to a matter of hours and requires no molds or prototypes. “Hackers can take the proprietary blueprint or software, send it to a third-world country, and have the product ready for market tomorrow,” said Carlson. “That’s a business disruption issue. Counterfeiters can put a company out of business.”

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Drug manufacturers may subvert counterfeiters by adding tracer elements and watermarks to their formulations, which protects their reputations, profits and public health. “If the counterfeiters get the recipe wrong, they might not produce high-quality drugs for public consumption,” Carlson said.

Other manufacturers can also use watermarks and digital rights management (DRM) software to prevent file sharing. Still, Carlson said, counterfeiting is an old problem. “Bad guys have always exploited new technologies for their personal gain.”

The materials used by manufacturers present a greater potential loss exposure than the 3D printer itself, said Dion, noting that it is just another piece of equipment, like a pencil or a lathe.

For example, if a 3D printer is used to replicate a cupcake, the manufacturer should be as careful of contaminants in the mix as traditional bakers need to be. “When 3D printer manufacturers purchase materials from suppliers, they need to perform due diligence on their supplier’s products also.”

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]
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Risk Insider: Greg Bangs

Cyber Gang Vigilance

By: | June 29, 2016 • 2 min read
Gregory W. Bangs is chief underwriting officer of global crime at XL Catlin. Over the last 30 years, he’s been underwriting insurance and developing new products in the U.S., U.K., Hong Kong and France. He can be reached at [email protected]

The Bank of Bangladesh didn’t know what hit it. More than $80 million vanished before anyone even noticed last February. The good news is that the criminals did not accomplish what they initially set out to do – steal nearly $1 billion from the bank’s account at the Federal Reserve Bank of New York.

The hackers, however, did succeed in installing malware in the Bangladesh central bank’s computer systems. Then they watched, probably for weeks.

They observed how to go about withdrawing money from the bank’s U.S. account, using its credentials for the SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging system.

SWIFT is used by banks around the world along with other financial institutions like brokerages, securities dealers, asset management companies, and others, for secure financial communication.

If an email’s subject line is so tempting that you can’t resist opening it, you probably shouldn’t.

Bangladesh’s central bank was not alone; the same crooks took $12 million from an Ecuadorean lender in January 2015. Fortunately, another attack trying to steal about $1 million from a Vietnamese bank late last year was thwarted.

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In all of these incidents, the perpetrators got access to the codes the banks use to connect to the SWIFT global payments network to request fund transfers that were directed elsewhere and then quickly disappear.

All indicators are pointing to one prime culprit – Dridex, a notorious gang of cyber criminals operating in Russia and former parts of Eastern Europe.

Dridex is a disciplined, highly organized gang that operates very much like any other company, following a Monday-to-Friday work week. During those working hours, it sends millions of phishing emails, managing to infect an average of 3,000 to 5,000 computers a day with its malware, also known as Dridex.

Once released, the malware lurks on a user’s computer, watching everything he or she does, waiting for some online banking activity, at which time it uses keystroke logging or web injections to steal the necessary user name and password so that it can carry out its own transactions later on.

These incidents are prompting central banks worldwide, as well as other businesses, to beef up security. After all, some security firms are already reporting that Dridex recently stepped up its attacks and added ransomware to its inventory. Most predict financial institutions will not be the prime target for long.

In addition to conducting regular audits and building strong information security awareness protocols, businesses, no matter what industry, are wise to reinforce some simple, yet vital, messages to all colleagues:

Delete any suspicious-looking emails and be wary of attachments: To unleash malware, hackers are smart enough to disguise attacks as generically worded messages such as, “Please look this over and get back to me by end of day.”

If it’s too good to be true, don’t look. If an email’s subject line is so tempting that you can’t resist opening it, you probably shouldn’t.

Working with their information security and technology teams, as well as many others, risk managers can play an integral role in driving online vigilance throughout their organizations.

Adopting the gang-style approach of the cyber criminals, risk managers can coordinate multiple disciplinary roles throughout the organization to fight cyber gangs’ crime games.

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Sponsored: Liberty Mutual Insurance

Commercial Auto Warning: Emerging Frequency and Severity Trends Threaten Policyholders

Commercial auto policyholders should consider utilizing a consultative approach and tools to better manage their transportation exposures.
By: | June 1, 2016 • 6 min read

The slow but steady climb out of the Great Recession means businesses can finally transition out of survival mode and set their sights on growth and expansion.

The construction, retail and energy sectors in particular are enjoying an influx of business — but getting back on their feet doesn’t come free of challenges.

Increasingly, expensive commercial auto losses hamper the upward trend. From 2012 to 2015, auto loss costs increased a cumulative 20 percent, according to the Insurance Services Office.

“Since the recession ended, commercial auto losses have challenged businesses trying to grow,” said David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty at Liberty Mutual Insurance. “As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”

For companies with transportation exposure, costly auto losses can hinder continued growth. Buyers who partner closely with their insurance brokers and carriers to understand these risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleets, and businesses.

Liberty Mutual’s David Blessing discusses key challenges in the commercial auto market.

LM_SponsoredContent“Since the recession ended, commercial auto losses have challenged businesses trying to grow. As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
–David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty, Liberty Mutual Insurance

More Accidents, More Dollars

Rising claims costs typically stem from either increased frequency or severity — but in the case of commercial auto, it’s both. This presents risk managers with the unique challenge of blunting a double-edged sword.

Cumulative miles driven in February, 2016, were up 5.6 percent compared to February, 2015, Blessing said. Unfortunately, inexperienced drivers are at the helm for a good portion of those miles.

A severe shortage of experienced commercial drivers — nearing 50,000 by the end of 2015, according to the American Trucking Association — means a limited pool to choose from. Drivers completing unfamiliar routes or lacking practice behind the wheel translate into more accidents, but companies facing intense competition for experienced drivers with good driving records may be tempted to let risk management best practices slip, like proper driver screening and training.

Distracted driving, whether it’s as a result of using a phone, eating, or reading directions, is another factor contributing to the number of accidents on the road. Recent findings from the National Safety Council indicate that as much as 27% of crashes involved drivers talking or texting on cell phones.

The factors driving increased frequency in the commercial auto market.

In addition to increased frequency, a variety of other factors are driving up claim severity, resulting in higher payments for both bodily injury and property damage.

Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index.

“Medical inflation continues to go up by about three percent, whereas the core CPI is closer to two percent,” Blessing said.

Changing physical medicine fee schedules in some states also drive up commercial auto claim costs. California, for example, increased the cost of physical medicine by 38 percent over the past two years and will increase it by a total of 64 percent by the end of 2017.

And then there is the cost of repairing and replacing damaged vehicles.

“There are a lot of new vehicles on the road, and those cost more to repair and replace,” Blessing said. “In the last few years, heavy truck sales have increased at double digit rates — 15 percent in 2014, followed by an additional 11 percent in 2015.”

The impact is seen in the industry-wide combined ratio for commercial auto coverage, which per Conning, increased from 103 in 2014 to 105 for 2015, and is forecast to grow to nearly 110 by 2018.

None of these trends show signs of slowing or reversing, especially as the advent of driverless technology introduces its own risks and makes new vehicles all the more valuable. Now is the time to reign in auto exposure, before the cost of claims balloons even further.

The factors driving up commercial auto claims severity.

Data Opens Window to Driver Behavior

To better manage the total cost of commercial auto insurance, Blessing believes risk management should focus on the driver, not just the vehicle. In this journey, fleet telematics data plays a key role, unlocking insight on the driver behavior that contributes to accidents.

“Roughly half of large fleets have telematics built into their trucks,” Blessing said. “Traditionally, they are used to improve business performance by managing maintenance and routing to better control fuel costs. But we see opportunity there to improve driver performance, and so do risk managers.”

Liberty Mutual’s Managing Vital Driver Performance tool helps clients parse through data provided by telematics vendors and apply it toward cultivating safer driving habits.

“Risk managers can get overwhelmed with all of the data coming out of telematics. They may not know how to set the right parameters, or they get too many alerts from the provider,” Blessing said.

“We can help take that data and turn it into a concrete plan of action the customer can use to build a better risk management program by monitoring driver behavior, identifying the root causes of poor driving performance and developing training and other approaches to improve performance.”

Actions risk managers can take to better manage commercial auto frequency and severity trends.

Rather than focusing on the vehicle, the Managing Vital Driver Performance tool focuses on the driver, looking for indicators of aggressive driving that may lead to accidents, such as speeding, sharp turns and hard or sudden braking.

The tool helps a risk manager see if drivers consistently exhibit any of these behaviors, and take actions to improve driving performance before an accident happens. Liberty’s risk control consultants can also interview drivers to drill deeper into the data and find out what causes those behaviors in the first place.

Sometimes patterns of unsafe driving reveal issues at the management level.

“Our behavior-based program is also for supervisors and managers, not just drivers,” Blessing said. “This is where we help them set the tone and expectations with their drivers.”

For example, if data analysis and interviews reveal that fatigue factors into poor driving performance, management can identify ways to address that fatigue, including changing assigned work levels and requirements.  Are drivers expected to make too many deliveries in a single shift, or are they required to interact with dispatch while driving?

“Management support of safety is so important, and work levels and expectations should be realistic,” Blessing said.

A Consultative Approach

In addition to its Managing Vital Driver Performance tool, Liberty’s team of risk control consultants helps commercial auto policyholders establish screening criteria for new drivers, creating a “driver scorecard” to reflect a potential new hire’s driving record, any Motor Vehicle Reports, years of experience, and familiarity with the type of vehicle that a company uses.

“Our whole approach is consultative,” Blessing said. “We probe and listen and try to understand a client’s strengths and challenges, and then make recommendations to help them establish the best practices they need.”

“With our approach and tools, we do something no one else in the industry does, which is perform the root cause analysis to help prevent accidents, better protecting a commercial auto policyholder’s employees and bottom line.”

To learn more, visit https://business.libertymutualgroup.com/business-insurance/coverages/commercial-auto-insurance-policy.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.


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Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty, workers compensation and group benefits.
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