Cyber Security’s Latest Buzz
Insurers, here’s a pop quiz. How secure are you that you fully understand all the risks you have accepted on behalf of your clients? That your book of business contains no surprises?
My guess is that you think you’re pretty secure, and my other guess is that you’re really not. One example should suffice, but before I explain, a trigger warning to decent folk: The subject is sex toys.
Right. Now that I have your attention … are you prepared to pay out when hostile forces take over your client’s love machines?
Far-fetched? Far from it. One vibrator on the market reports back to its manufacturer on the behavior of the toy’s owner. Worse, it can be commandeered by hackers.
Full disclosure: I know nothing of sex toys. In fact, I’m mortified just writing about them.
Insurers must cope with unknowable change while providing insureds with good vibrations.
Here are some facts, to steady the ship.
“Two years ago, someone had the good idea to put a Bluetooth connection inside a vibrator,” The Guardian newspaper reported. The vibrator can be linked to a smartphone app that controls it remotely. One party tells the vibrator what to do, and the other party, well, I dunno.
At a hacking conference, two independent hackers from New Zealand reported that the link between the vibrator and the app is not secure. A hacker could take control of the vibrator at a crucial moment and, well, I dunno.
Two million hackable vibrators have been sold. People could be unaware that they’re having virtual sex with total strangers, although in some circles that might be considered a good thing.
Sooner or later, though, hackees must surely come to the conclusion that advantage has been taken of them and demand recompense. Does your company cover vibrator hacking?
The app reports the temperature of the vibrator to its manufacturer every minute, and also reports changes in the intensity of the vibrations.
“What are the implications of who they’re going to give that data to?” asked one of the hackers.
In a statement, manufacturer Standard Innovation said the information was for “market research purposes, so that we can better understand what settings and levels of intensity are most enjoyed.” So that’s alright then.
If the readers of this magazine, the world’s smartest insurance people, were asked to list 100 utterly bizarre risks, not one of them would have written down “vibrator hacking.”
Insurers must cope with unknowable change while providing insureds with good vibrations. By the time the unimaginable becomes imaginable and then becomes hard fact, the risk is routinely covered and insurers are worrying about even more absurd risks that they might one day be asked to cover.
That’s why insurance is so fascinating to the observer — no one ever has any idea what’s coming next. &
Asleep at the Wheel
Drowsy driving can be just as deadly as drunk driving — and the transportation industry is taking steps to combat this sometimes tragic problem.
The National Highway Traffic Safety Administration estimates that 83,000 crashes each year are caused by driver drowsiness. Motor carriers, transportation companies and organizations with their own fleets are acutely aware of the tragedies that driver fatigue can cause, as well as the major financial and other losses that can result.
Even if a driver is not at fault in a crash that results in serious injuries or fatalities, ultimately the company’s reputation is at stake, said Michael Nischan, vice president, transportation and logistics risk control at EPIC Insurance Brokers and Consultants in Atlanta.
The company may be ordered to pay for damages, especially if management did not properly vet the driver for a sleep disorder or if the driver’s medical certificate was expired.
“Damages from civil suits may not be covered by insurance, so whether the driver is at fault or not, the costly settlements may ultimately cause a company to go out of business,” Nischan said. “The key is to ensure the driver is qualified before hire and throughout employment, and that requires continuing dialogue and education throughout the organization.”
Rates on the Rise
Crashes involving driver fatigue have also impacted commercial insurance for fleets. Craig Dancer, Marsh’s U.S. transportation industry practice leader in Washington, D.C., said that rates in the insurance market had been soft when carriers were trying to get business and build volume, and underwriting, in some instances, may have been lax.
“So now we’re seeing premiums rise to support the carriers’ level of losses, and some markets have exited the trucking industry,” Dancer said.
Underwriters wanting to write best-in-class are now looking to see whether organizations are using technology to make sure their drivers are performing optimally, he said. Underwriters are also looking to see if organizations are going down the regulatory checklist on how to deal with sleep apnea.
“The proactive motor carriers and transportation drivers have been addressing sleep apnea for a while now, and they have become really good at vetting drivers and adhering to fatigue management programs,” Dancer said.
Companies are conducting sleep studies and buying CPAP machines for drivers diagnosed with sleep apnea, which can have a huge impact on driver fatigue, said Todd Reiser, vice president and producer with Lockton’s transportation practice in Kansas City, Mo.
“A lot of motor carriers are trying to improve driver wellness, which correlates directly with driver fatigue,” Reiser said. “Truck driving is a sedentary job, and drivers tend to struggle with their health, whether it’s from occupational accidents or weight problems.”
The industry has also encouraged truck stops to provide healthier food alternatives, and trucking companies are implementing these alternatives at their own terminals, as well as exercise facilities, workout rooms, and nurses or physicians onsite to provide check-ups, he said.
Large trucking companies have terminals throughout the country in areas where they have a high concentration of business. Underwriters respond favorably to these types of programs.
Technology Use Increases Safety
Underwriters are also looking for anything from a technology perspective to make drivers safer, such as warning systems if a truck crosses the center line or drives onto the shoulder of the road, Reiser said. There is also collision mitigation technology that will stop or slow vehicles before a crash.
Advanced technologies can help identify tired, drowsy or distracted drivers. Canadian-based Fatigue Science makes biometric wristbands that drivers wear, said Rich Bleser, fleet safety specialty practice leader for Marsh Risk Consulting in Milwaukee.
Australian-based Seeing Machines builds dash-mounted sensors with image-processing technology that tracks the movements of a driver’s eye, face, head and facial expressions to detect driver fatigue — and even distraction from doing things like texting.
Seeing Machines also provides in-cab driver alerts to prevent accidents, and 24/7 monitoring and data analytics so employers can improve practices.
The National Safety Council recommends drivers stop every 100 miles and walk around, Bleser said. Keep vehicle temperature cooler and drink ice water, because when the core body temperature is lower, the body’s “internal furnace” kicks in and builds energy to stay alert.
“If drivers are tired, they should not drink caffeine, because even if it makes a person feel that they are awake, caffeine can’t control micro sleep,” he said. “I recommend taking a 10- to 15-minute cat nap, if the driver can find a safe place to park their vehicle.”
Jenn Guerrini, executive commercial auto specialist at Chubb Transportation Liability in Whitehouse Station, N.J., said that driver fatigue can also be a problem for ridesharing companies, as they are not regulated like taxi cab drivers.
“For most of the drivers, this is their second or third job, and there is no regulation on hours of work and fitness of duty,” Guerrini said.
She said some organizations forbid employees to use ridesharing services from 1 a.m. to 4 a.m. while traveling.
For organizations with their own commercial fleets, they should track driving hours automatically in real-time by installing electronic logging devices registered and certified by the Federal Motor Carrier Safety Administration, she said. Such devices will be mandated by the end of 2017.
Companies should also develop best practices for dispatchers, said Chris Reardon, vice president of transportation, warehousing and logistics practice at Assurance in Schaumburg, Ill.
“People are going to seek to put the fault on the motor carrier as well as the driver, but companies should be managing this issue at the dispatcher level as well because often, that is where hours of service issues originate,” Reardon said.
“Poor dispatching and load planning can lead to drivers feeling pressure from the dispatchers and management to get the trip done, regardless of the time constraints.”
He reminds clients of the widespread public scrutiny and even condemnation that could occur after crashes involving driver fatigue, citing comedian Tracy Morgan, who was hit by a Walmart driver who had been awake for more than 28 hours in 2014.
“There are always going to be drivers who don’t care about regulations, because they want to make the most money running the most miles,” Reardon said. “If the management of a company does not establish a culture of safety and compliance in the office or terminal, it will inevitably trickle down to the drivers as a result.” &
Think You Don’t Need Environmental Insurance?
“I don’t work with hazardous materials.”
“My industry isn’t regulated by the EPA.”
“We have an environmental health and safety team, and a response plan in place.”
“We’ve never had an environmental loss.”
“I have coverage through my other general liability and property policies.”
These are the justifications clients most often give insurers for not procuring environmental insurance. For companies outside of sectors with obvious exposure — oil and gas, manufacturing, transportation — the risk of environmental damage may appear marginal and coverage unnecessary.
“Environmental insurance is not like every other insurance,” said Mary Ann Susavidge, Chief Underwriting Officer, Environmental, XL Catlin. “The exposure is unique for every operation and claims don’t happen often, so many businesses view coverage as a discretionary purchase. But the truth is that no one is immune to environmental liability risk.”
Every business needs to be aware of their environmental exposures. To do that, they need a partner with the experience to help them identify exposures and guide them through the remediation claims process after an incident. The environmental team at XL Catlin has been underwriting these risks for 30 years.
“Insureds might not experience this type of claim every day, but our environmental team does,” said Matt O’Malley, President, North America Environmental, XL Catlin. “We’ve seen what can happen if you’re not prepared.”
Susavidge and O’Malley debunked some of the common myths behind decisions to forego environmental coverage:
Myth: My business is not subject to environmental regulations.
Reality: Other regulators and business partners will require some degree of environmental protection.
Regulatory agencies like OSHA are more diligent than ever about indoor air quality and water systems testing after several outbreaks of Legionnaires disease.
“The regulators often set the trends in environmental claims,” Susavidge said. “In the real estate area it started with testing for radon, and now there’s more concern over mold and legionella.”
Multiple hotels have been forced to shut down after testing revealed legionella in their plumbing or cooling systems. In addition to remediation costs, business interruption losses can climb quickly.
For some industries, environmental insurance acts as a critical business enabler because investors require it. Many real estate developers, for example, are moving into urban areas where their clients want to live and work, but vacant lots are scarce. Those still available may be covering up an urban landfill or a brownfield.
“We’re able to provide expertise on those sites and the development risks so the contractor can get comfortable working on it. It’s about allowing our clients to stay relevant in their markets,” O’Malley said. “In this case, the developer is not an insured with a typical environmental exposure. But if there is a contaminant on the worksite, they could inadvertently disperse it. In a high-population urban area, the impact could be large.”
Banks also quite often require the coverage specifically because developers are turning to these locations with higher potential environmental risk.
“Though it’s not a legal requirement, insurance is a facilitator to the deal that developers really can’t operate without,” Susavidge said.
Myth: The small environmental exposure I have would be covered under other polices.
Reality: Environmental losses can result from exposure to off-site events and are excluded by many property and casualty policies.
Environmental risks on adjoining properties can lead to major third party losses. Vapor intrusion under the foundation of one property, for example, can unknowingly underlie the neighboring properties as well. The vapor intrusion can then seep into the surrounding properties, endangering employees and guests.
In other words, your neighbor’s environmental exposure may become your environmental exposure.
O’Malley described a claim in which a petroleum pipeline burst, affecting properties and natural resources 10 miles downstream even though the pipeline was shut off two minutes after the rupture. The energy company that owns the pipeline might have coverage, but what about the other impacted organizations? Many other property policies exclude environmental damage.
Sometimes the exposure is even more unexpected. In 2005, for example, a train carrying tons of chlorine gas crashed into a parked train set sitting in the yard of Avondale Mills — a South Carolina textile plant. The gas permanently damaged plant equipment and forced the operation to shut down.
“It’s not always obvious when you have an environmental exposure,” Susavidge said.
“When there is a big loss or a pattern of losses, the casualty market will typically move to exclude it,” said O’Malley. “And that’s where the environmental team looks for a solution. Environmental coverage has been developed to fill the gaps that other coverages won’t touch.”
Myth: We already have a thorough response plan if there is an incident.
Reality: Properly handling an environmental event requires experience and expertise.
In addition to coverage, risk managers need experience and expertise on their side when navigating environmental claims.
“For many of our clients, their first environmental claim is a very different experience because the claimant is not always a typical third party – it’s a government agency or some other organization that they lack experience with,” Susavidge said. “Our claims team is made up of attorneys that have specific domain experience litigating environmental claims issues.”
Beyond its legal staff, XL Catlin’s claims consulting team and risk engineers come with specialized expertise in environmental issues. 85 to 90 percent of the team members are former environmental engineers and scientists, civil engineers, chemists, and geologists.
“Handling environmental claims requires specialized expertise with contaminants and different types of pollution events,” O’Malley said. “That’s why our 30 years of experience makes a difference.”
Thirty years in the business also means 30 years of loss data.
“That informs us as a carrier how to provide the right types of services for the right clients,” Susavidge said. “It gives us insight into what our insureds are likely to experience and help us determine what support they need.”
Insureds also benefit from the relationships that XL Catlin has built in the industry over those 30 years. When the XL Catlin team is engaged following a covered pollution event, the XL Catlin claims team can deploy seasoned, experienced third party contractors that partner with the insured to address the spill and the potential reputational risk. And they receive guidance on communicating with regulatory bodies and following proper reporting procedures.
“The value of the policy goes beyond the words that are written,” O’Malley said. “It’s the service we provide to help clients get back on their feet, so they can focus on their business rather than the event itself.”
For more information on XL Catlin’s environmental coverage and services, visit http://xlcatlin.com/insurance/insurance-coverage/casualty-insurance.
The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details. XL Catlin, the XL Catlin logo and Make Your World Go are trademarks of XL Group Ltd companies. XL Catlin is the global brand used by XL Group Ltd’s (re)insurance subsidiaries. In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. Information accurate as of September 2016.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with XL Catlin. The editorial staff of Risk & Insurance had no role in its preparation.