It’s probably way too soon to start dreaming up insurance products that will respond to the risk that robots are going to rise up and annihilate humankind. And good luck finding the market capacity for it anyway.
However, robots and robotics are fast becoming a fixture of our reality, and the industry is poised for rapid expansion.
Robots, in some form or another, have been present in the manufacturing sector since 1962, when a New Jersey General Motors factory began using a robot to do spot welding and extract die castings. By the ’70s, increasingly sophisticated machines, operated by minicomputers, were being widely used for small parts assembly.
Robotics have long since moved away from the assembly line. Robots are present everywhere from warehouses to hospitals, from farms to laboratories, and from the military to mines and more.
One of the latest robotic forays into the workplace is at the Aloft hotel in Cupertino, Calif., where “The Botlr” — a service robot that looks like a distant cousin of R2-D2 — is being used to make small deliveries to guests’ rooms. Robots may soon be flipping your burgers or picking the grapes that make your favorite wine.
Video: The Botlr, a robotic bellhop built for Aloft Hotels, delivers an item to a guest in his room.
But the application of robotics is going ever deeper.
The development of robots connected to the Internet, big data, the cloud and advanced computing technology such as artificial intelligence (AI) algorithms are bringing a new class of robots into the workplace — those that can sense, think and act based on specific data and sensory input, and make routine decisions.
In June, the Associated Press began experimenting with having machines write short business stories. The news organization said that eventually, the majority of its U.S. corporate earnings stories would be produced using automation. (As of press time, Risk & Insurance® is not yet employing robotic journalists.)
There are obvious positives to the growth of robotics in the workplace. It makes sense to give robots the high-turnover jobs that are mind-numbingly rote, as well as those jobs and tasks considered extremely dangerous.
But the change that is coming may be far more profound. Garry Mathiason, co-chair of the Robotics, Artificial Intelligence and Automation practice group at Littler Mendelson in San Francisco, cited a 2013 study published by the Oxford Martin School, examining automation potential across the U.S. labor market.
According to the study, said Mathiason, “47 percent of jobs currently done by people in the United States will be done by machines and software within one to two decades. That doesn’t mean there’s going to be 50 percent unemployment; it does mean there’s going to be that much change taking place.”
(For the record, the Oxford Martin study said that insurance underwriters are in the highest risk category for being taken over by automation, just ahead of claims and policy processing personnel, claims adjusters, examiners and investigators.)
“2010 was a turning point in terms of the acceleration of the technology and its implications,” said Mathiason. “There is a change taking place that will be the equivalent of the Internet in terms of what it will do to the workplace.”
Video: At the fulfillment center of North Reading, Mass.-based Kiva Systems, 100 robots work alongside 300 fulfillment associates.
So far though, companies that employ robots see the importance of having human checks and balances on the robots’ work. Many companies are actually increasing staffing levels to support their robotic equipment.
That raises concerns about whether employees are at increased risk of harm by robotic equipment, or may inadvertently interfere with safe robotic operations. A fair number of workplace fatalities related to robotics have occurred in the last decade or two.
As it stands, employers are covered by existing workers’ comp statutes if a robot were to cause a workplace injury or fatality, the same as they would be in the event of an injury or death caused by any other piece of equipment.
The same would not be true, however, if a robot were to injure a customer, a vendor or any other visitor to a facility. In those cases, who can expect to face a lawsuit? The answer, for now, is: It depends.
Liability issues get sketchy when you factor in the element of closed versus open robotics.
In a closed robotics system, a robot is designed and manufactured for one specific purpose. (iRobot’s Roomba, for instance, is a vacuum — period — no matter how many YouTubers use it as an amusement park ride for their cats.)
But with an open robotic system, independent developers would be able to create programs, or apps, to allow the system to accomplish different user-defined tasks, adding more potential culprits in the event of a claim.
“This is going to be a big issue,” said Stephen Wu, an attorney who is of counsel to Silicon Valley Law Group based in San Jose, Calif.
“[In the event of a robot-related accident], I’m going to be doing an investigation and using experts to determine the root cause. Was it my own environment? Was it the hardware manufacturer? Was it the firmware manufacturer? Was it the application software? Was it the operating system manufacturer? Or was it some subcomponents thereof? Or else … was it a data service provider [such as one providing mapping data]?”
These questions will grow still more complicated with the growth of adaptive technology — meaning when robots make decisions on their own based on the data and sensory input they receive.
“Increasingly, adaptive intelligence is being built in where the robot is going to be changing what it does based on external stimuli,” said Drew Haaser, U.S. technology practice leader for Marsh.
“Let’s say it’s putting welds on an auto and it’s been programmed to sense the properties of the materials it’s welding and adapt … . If it makes the wrong decision — what are going to be the legal implications to that?”
That question reaches a whole other level when the consequence is a loss of life.
“What if you have a robot that is … facing the decision to either run over your daughter or hit a school bus full of kids, what is the right thing to do in that situation?” asked David Beyer, managing member of Digital Risk Resources.
“I think that it’s a very complex issue. … They try to think through a lot of these situational risks but you can’t predict all the risks all the time.”
“I think what we’re going to see is that all parties are going to be drawn into these lawsuits. They’re all going to have their feet put to the fire and they’re all going to point at each other. Unfortunately, a jury is going to have to decide these things.” — David Beyer, managing member, Digital Risk Resources
It’s crucial, said Guy Fraker, that we remember robotics is not synonymous with infallible.
“You can say, ‘We can fix that with an algorithm.’ But can you program for that kind of variability in advance? No,” said Fraker, former director of business trends and foresight for State Farm and co-founder and CEO of consultancy Autonomous Stuff.
“We’re learning new things about the technology every day.”
“These are not dumb devices anymore,” said Haaser, “and when they make mistakes in how they interpret stimuli, is it a professional liability error in the design of the product or in the software as opposed to a straightforward bodily injury/property damage claim?”
As more businesses incorporate adaptive technology into the workplace and robotics follow cues based on what they’re learning in their environments, the more that risk management will be expected to have thought through all of the implications of how the robot or robotic systems might respond.
Eventually, there will be cases where robots make “correct” decisions that result in tragic outcomes.
Several experts cited the example of a driverless car faced with a choice of hitting a tractor trailer or hitting an occupied baby stroller. Most assume that the car would attempt to minimize damage by hitting the stroller.
In a case like that, “Was it a mistake? Well, no,” said Haaser.
“Was it what a human with a duty to care would have done? No! And how will the courts treat that? Unfortunately, there are a whole lot of questions and not a whole lot of answers yet as to how the courts will treat that.”
“I think what we’re going to see,” said Beyer, “is that all parties are going to be drawn into these lawsuits.
“They’re all going to have their feet put to the fire and they’re all going to point at each other. Unfortunately, a jury is going to have to decide these things.”
The extremely good robotics news is that a great many of the developments coming out of the industry have the potential to decrease employer exposure rather than increase it.
In particular, advances in exoskeleton technology are moving to the forefront, even gaining a global stage during the 2014 World Cup, when a young paraplegic man made the first official kick of the event, wearing a mind-controlled robotic exoskeleton.
Video: Juliano Pinto, 29-year-old paraplegic man, successfully made the first kick of the 2014 World Cup in Sao Paulo, wearing a full body robotic suit.
In South Korea last year, employees of Daewoo Shipbuilding and Marine Engineering helped test a prototype of a full-body exoskeleton that will enable them to lift large hunks of metal, pipes and other objects without excess exertion or risk of strain or injury.
“In basic safety and loss control, the first line of defense is to engineer the risk out; robotics is one of the purest forms of ‘engineering out’ a risk,” said Bill Spiers, vice president and risk consulting manager, Lockton Cos.
“You have eliminated the human interaction around a task that’s going to create soft tissue strains that are very costly.”
Industry leaders such as Ekso Bionics and Cyberdyne are actively producing exoskeletons that have a broad range of applications. Robotic suits could dramatically reduce injury risk for workers with physically intensive jobs, potentially enhancing productivity at the same time.
“Wearable technology has the potential for ameliorating some [health and safety] concerns,” said Littler Mendelson’s Mathiason. “You can see it someday becoming as common as safety shoes.”
Mathiason said this may eventually be of equal importance as applied to Americans with Disabilities Act accommodation issues.
“You have people who couldn’t perform the essential functions of the job. Then seven million paraplegics can suddenly walk and do things nobody thought they would ever do again,” he said.
For workers who’ve already suffered temporary or permanent disabling injuries, exoskeletons could eventually open the doors for new means to keep injured workers on the job. Even severely disabled employees could potentially be returned to productive and essential work, increasing quality of life for injured workers while saving employers millions in partial and total disability payments.
“You have people who couldn’t perform the essential functions of the job. Then seven million paraplegics can suddenly walk and do things nobody thought they would ever do again.” — Garry Mathiason, co-chair of the Robotics, Artificial Intelligence and Automation practice group, Littler Mendelson
Currently, 330 of Cyberdyne’s HAL-5 full-body exoskeletons have been leased to hospitals across Japan, where they assist patients with muscle weakness or disabilities due to stroke and spinal cord injuries. In some industries, this area of robotics could virtually eliminate obstacles to accommodating injured or disabled workers.
As companies make critical decisions about incorporating robotics into their operations, it’s important to bring risk management into the loop early on.
While companies increasingly transition processes to robotics for the sake of cost savings, said Haaser, “the challenge for the risk manager will be to see that some of those savings are being reinvested back into risk management.”
But the most urgent piece is getting risk management involved in decisions about capital expenditures like robotics from the get-go.
John Abbott, an account executive at Arthur J. Gallagher & Co., said there are a host of questions that risk managers need to think through in advance.
“Are you going to be using it to do something that’s never been done before? Do you want to go into an area where there’s a potential environmental issue that may impair the robot’s performance? Robots are mechanical and electrical systems — any robotic system is prone to wear and tear and failure to some degree.”
Wu of the Silicon Valley Law Group added that due diligence is of utmost importance when selecting vendors for robotic system components, including whether there are any kinds of certifications that apply to the machines.
“Is there a UL-type seal of approval that we could look for that can be had?” Wu asked. “And what kind of testing went into the robots in the first place?”
Issues such as hackers and the potential for fraud must also be given consideration, said Fraker. “For every great capability that’s ever been developed … there’s an opposing potential dark side,” he cautioned.
Hearing from Employers
Employer engagement and superior service provider performance are acknowledged keys to successfully managing workers’ compensation claims.
Those employers that care enough to produce great results for their injured workers don’t tend to beat their own drums, though.
But they will get an unprecedented chance to share their strategies and practices on a wide range of workers’ compensation topics at the National Workers’ Compensation and Disability Conference® & Expo at the Mandalay Bay Hotel & Casino in Las Vegas, Nov. 19-21.
Two speakers from Harley-Davidson, for example, will discuss claims-mitigation practices that saved their company millions of dollars. Those practices include integrating a variety of company resources including health services, safety and ergonomics expertise.
They will also tell how Harley-Davidson integrated the services of vendor partners, such as BTE Technologies, which helps return injured employees to the job and keeps others working with a post-offer employment testing program that assesses functional ability to safely perform work, said Beth Mrozinsky, the motorcycle manufacturer’s director of safety and health.
Their work has helped address challenges common in many U.S. workplaces, such as those driven by an aging workforce.
Harley-Davidson’s successes also come from integrating vendor partners to help explore loss-reduction processes. The company is increasingly applying those processes to non-occupational injuries after proving them successful in mitigating occupational issues, Mrozinksi said.
“We work really hard with our vendor partners to really pull this together,” Mrozinsky said. “We are almost like one unit that thinks through these processes.”
In another session, speakers Darin Hampton, workers’ compensation regional coordinator at International Paper, and Jodie L. Massingill, senior manager, casualty claims at Sysco Corp., will share their strategies for successfully overseeing a range of services and how they get the best possible support from vendor partners.
In addition to employers, presenters will include representatives from some of the nation’s largest workers’ comp insurers, third-party administrators, brokers, managed care companies and attorneys specializing in workers’ compensation.
Focus on Medical
A growing trend to improve the quality of medical care delivered to injured workers relies on measuring doctor performance to build networks limited to providers capable of producing the best claims outcomes.
Jane Ish, national networks director for Liberty Mutual Insurance, will present a conference session on outcomes-based networks.
“We believe if you start right with the right physician and his entire medical ecosystem — in terms of who he counts on for referring — then you are more likely to have injured workers go back to work quicker and reduced medical costs,” she said.
Randy L. Triplett, workers’ compensation and integrated disability manager for The Goodyear Tire & Rubber Co., will join Ish in the presentation.
Other current challenges and the tools being applied to mitigate them will also receive prominent attention at the conference.
Jim Andrews, executive VP of pharmacy services at Healthcare Solutions Inc., and David Smith, divisional VP of risk management at Family Dollar Stores Inc., for example, will talk about how analytics and predictive modeling help identify and prevent drug abuse.
The nation’s growing diversity and that dynamic’s impact on workers’ comp and disability management will be examined by Jennifer De La Torre, executive director of workforce diversity at AT&T and formerly the company’s director of risk management.
Elizabeth Demaret, executive VP, chief customer relationship officer at Sedgwick Claims Management Services Inc., will join De La Torre.
De La Torre said considerations of racial and ethnic diversity, treatment of veterans in the workforce and age differences are all impacting workers’ comp management strategies.
Expect to hear session topics not commonly offered at workers’ comp conferences, but that nonetheless have significant impact on the industry and employer programs.
Three private equity executives, whose firms owned well-known workers’ comp companies, will discuss the growing influence of private equity in this business. It is unusual for private equity leaders to address a workers’ comp crowd, said Joe Paduda, principal at Health Strategy Associates LLC.
“Private equity people speak at investor conferences and at some other conferences, but never to my knowledge in a workers’ comp-related conference,” said Paduda, who will moderate the session. “Especially folks like these who actually assess the business, follow the workers’ comp industry and really understand it at both a granular and strategic level.”
Paduda promised to allow plenty of time for audience questions.
“We are going to have an extended question and answer [time] just because there is so much interest in the role of private equity in the workers’ comp business,” he said.
Legal and regulatory issues are also on tap.
The Occupational Safety and Health Administration’s 2013 temporary worker initiative directed its field inspectors to place greater emphasis on assessing whether employers using temp workers comply with their responsibilities.
“There has been a lot of postulation about what the ACA’s impact is on the industry.” —Denise Zoe Gillen-Algire, director, managed care and disability corporate risk, Safeway Inc.
Corey Berghoefer, senior VP, risk management and insurance for Ranstad, a global employment services provider, will join two workers’ comp attorneys to discuss OSHA’s initiative and other risk-management considerations accompanying current growth in temp worker hiring.
“I’ll talk about the duties and responsibilities, and how OSHA will come in during an investigation and view each of the parties,” he said.
The Patient Protection and Affordable Care Act is another current topic that conference speakers will weigh in on at a session titled “Healthcare Reform: Strategies You Can Apply Now.”
“There has been a lot of postulation about what the ACA’s impact is on the industry,” said Denise Zoe Gillen-Algire, director, managed care and disability corporate risk at Safeway Inc. and the conference’s program co-chair. “We want to say, ‘OK, what is the takeaway? What does it mean to employers?’ We want to take that information and say, ‘What can you do as employers to manage your workers’ comp program and either prepare or mitigate some of the impacts?’ ”
William Wilt, president of Assured Research, will join Gillen-Algire.
Here are some other presentations:
Opening Keynote: Integrating Employees’ Health and Well-Being to Improve the Bottom Line
L. Casey Chosewood, M.D., is senior medical officer and director of the Office for Total Worker Health Coordination and Research Support at the National Institute for Occupational Safety and Health. Chosewood will demonstrate how to reduce employer costs by integrating occupational health and safety with health promotion and post-injury management.
Session: Modeling Managed Care for Program Impact
Speakers from two large, self-insured employers and a national workers’ comp consultant will explain managed care services and how to evaluate which ones deliver the best outcomes and greatest cost savings.
Speakers: Barry Bloom, principal at The bdb Group; John Riggs, manager of workers’ compensation, Disneyland Resort; and John Smolk, principal manager, workers’ compensation, Southern California Edison.
Session: Risk Financing: Selecting the Best Option for Your Company
Mark Walls, conference program co-chair and VP, communications and strategic analysis at Safety National, will cover a range of considerations for employers weighing various insurance arrangements. From buying first-dollar coverage and large deductible programs to self-insuring, he will lay out the key considerations for each.
Session: Loss Mitigation of High Value Workers’ Compensation Claims
Hear about risk analysis that can identify old claims previously considered incapable of being resolved. The session will seek audience participation while discussing several cost drivers such as treating-doctor issues and Medicare set-asides.
Speakers: Christianne Quinn, national workers’ compensation manager at Pep Boys; and David R. Kunz, managing partner at Kunz & Germick.
Session: Behavior-Based Safety Program: How You Can Prevent Injuries and Improve Product Quality
Safety and product quality go hand in hand, so a behavior-based safety program stands to improve loss prevention and high-quality production throughout a company.
Speaker: Julia Sfurm, corporate senior risk operations manager, Elkay Manufacturing Co.
Visit www.wcconference.com/agenda.html for a look at the conference’s complete agenda.
A Renaissance In U.S. Energy
America’s energy resurgence is one of the biggest economic game-changers in modern global history. Current technologies are extracting more oil and gas from shale, oil sands and beneath the ocean floor.
Domestic manufacturers once clamoring for more affordable fuels now have them. Breaking from its past role as a hungry energy importer, the U.S. is moving toward potentially becoming a major energy exporter.
“As the surge in domestic energy production becomes a game-changer, it’s time to change the game when it comes to both midstream and downstream energy risk management and risk transfer,” said Rob Rokicki, a New York-based senior vice president with Liberty International Underwriters (LIU) with 25 years of experience underwriting energy property risks around the globe.
Given the domino effect, whereby critical issues impact each other, today’s businesses and insurers can no longer look at challenges in isolation one issue at a time. A holistic, collaborative and integrated approach to minimizing risk and improving outcomes is called for instead.
Aging Infrastructure, Aging Personnel
The irony of the domestic energy surge is that just as the industry is poised to capitalize on the bonanza, its infrastructure is in serious need of improvement. Ten years ago, the domestic refining industry was declining, with much of the industry moving overseas. That decline was exacerbated by the Great Recession, meaning even less investment went into the domestic energy infrastructure, which is now facing a sudden upsurge in the volume of gas and oil it’s being called on to handle and process.
“We are in a renaissance for energy’s midstream and downstream business leading us to a critical point that no one predicted,” Rokicki said. “Plants that were once stranded assets have become diamonds based on their location. Plus, there was not a lot of new talent coming into the industry during that fallow period.”
In fact, according to a 2014 Manpower Inc. study, an aging workforce along with a lack of new talent and skills coming in is one of the largest threats facing the energy sector today. Other estimates show that during the next decade, approximately 50 percent of those working in the energy industry will be retiring. “So risk managers can now add concerns about an aging workforce to concerns about the aging infrastructure,” he said.
Increasing Frequency of Severity
Current financial factors have also contributed to a marked increase in frequency of severity losses in both the midstream and downstream energy sector. The costs associated with upgrades, debottlenecking and replacement of equipment, have increased significantly,” Rokicki said. For example, a small loss 10 years ago in the $1 million to $5 million ranges, is now increasing rapidly and could readily develop into a $20 million to $30 million loss.
Man-made disasters, such as fires and explosions that are linked to aging infrastructure and the decrease in experienced staff due to the aging workforce, play a big part. The location of energy midstream and downstream facilities has added to the underwriting risk.
“When you look at energy plants, they tend to be located around rivers, near ports, or near a harbor. These assets are susceptible to flood and storm surge exposure from a natural catastrophe standpoint. We are seeing greater concentrations of assets located in areas that are highly exposed to natural catastrophe perils,” Rokicki explained.
“A hurricane thirty years ago would affect fewer installations then a storm does today. This increases aggregation and the magnitude for potential loss.”
On its own, the domestic energy bonanza presents complex risk management challenges.
However, gradual changes to insurance coverage for both midstream and downstream energy have complicated the situation further. Broadening coverage over the decades by downstream energy carriers has led to greater uncertainty in adjusting claims.
A combination of the downturn in domestic energy production, the recession and soft insurance market cycles meant greatly increased competition from carriers and resulted in the writing of untested policy language.
In effect, the industry went from an environment of tested policy language and structure to vague and ambiguous policy language.
Keep in mind that no one carrier has the capacity to underwrite a $3 billion oil refinery. Each insurance program has many carriers that subscribe and share the risk, with each carrier potentially participating on differential terms.
“Achieving clarity in the policy language is getting very complicated and potentially detrimental,” Rokicki said.
Back to Basics
Has the time come for a reset?
Rokicki proposes getting back to basics with both midstream and downstream energy risk management and risk transfer.
He recommends that the insured, the broker, and the carrier’s underwriter, engineer and claims executive sit down and make sure they are all on the same page about coverage terms and conditions.
It’s something the industry used to do and got away from, but needs to get back to.
“Having a claims person involved with policy wording before a loss is of the utmost importance,” Rokicki said, “because that claims executive can best explain to the insured what they can expect from policy coverage prior to any loss, eliminating the frustration of interpreting today’s policy wording.”
As well, having an engineer and underwriter working on the team with dual accountability and responsibility can be invaluable, often leading to innovative coverage solutions for clients as a result of close collaboration.
According to Rokicki, the best time to have this collaborative discussion is at the mid-point in a policy year. For a property policy that runs from July 1 through June 30, for example, the meeting should happen in December or January. If underwriters try to discuss policy-wording concerns during the renewal period on their own, the process tends to get overshadowed by the negotiations centered around premiums.
After a loss occurs is not the best time to find out everyone was thinking differently about the coverage,” he said.
Changes in both the energy and insurance markets require a new approach to minimizing risk. A more holistic, less siloed approach is called for in today’s climate. Carriers need to conduct more complex analysis across multiple measures and have in-depth conversations with brokers and insureds to create a better understanding and collectively develop the best solutions. LIU’s integrated business approach utilizing underwriters, engineers and claims executives provides a solid platform for realizing success in this new and ever-changing energy environment.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.