How Insurance Can Help Manage the Darkside of 4 Emerging Technologies : Risk & Insurance

With so many businesses and individuals rushing to embrace new technologies like AI and self-driving vehicles, carriers need to be vigilant.

All new technologies bring with them new exposures, and it will take the insurance industry some time to create appropriate solutions.

“It’s incumbent on the carrier to understand these specific use cases,” said Jason Keeler, integrated technology insurance product manager at Philadelphia Insurance Companies (PHLY).

“The potential for injury varies considerably depending on what they’re using it for.”

Here’s a look at four new emerging technologies and the potential exposures and insurance challenges companies could face because of them.

1) Beware of AI Lawsuits

Just shy of two years ago, OpenAI released ChatGPT. Since then, the industry has continued to train AI models with a number of different specialties. Some are trying to harness the tech to help doctors or lawyers.

The tech captured many people’s imaginations, making folks eager to use it. However, people’s optimism may be ahead of the tool’s actual skills. Applying AI too quickly involves a lot of risk, both reputational and tangible.

The first wave of AI lawsuits is already here, though most of those are directed at the developers of the tech itself. Pulitzer prize winning authors, the New York Times, artists and others are suing AI developers for copyright infringement. The argument goes that developers trained their AI models using the works of thousands of writers and artists without seeking their permission.

“Authors of content feel like their content was basically ripped off to train a generative AI system, and they weren’t compensated for it,” Keeler said. “I’m sure they’ll probably settle out of court because I don’t think ChatGPT and OpenAI want to set some kind of precedent on that.”

Companies should watch for the outcome of this lawsuit if they’re using generative AI or developing their own systems. Additionally, they should be preparing to face E&O or EPL lawsuits of their own should their use of AI run afoul. If an HR department uses AI to screen applicants, they could be sued over potential bias in the algorithm. Companies may also face E&O suits if AI systems make decisions that lead to financial losses.

“I don’t know that companies can dodge their liability by just saying, ‘we didn’t make the decision; the generative AI software made the decision,’” Keeler said. “That’s not going to be an adequate response.”

Though carriers have not started writing exclusions or creating policy language around the use of AI en masse, they might start soon if claims start rolling in.

“A lot of carriers are taking a very cautious approach to accounts that are heavily involved with generative AI,” Keeler said.

2) Will Distracted Driving Increase with Autonomous Vehicles?

There are few technologies as hyped — and possibly as disappointing — as autonomous vehicles. For many years, manufacturers have promised they are close to a fully self-driving car… and then miss the deadlines from their predictions.

Still, there are a number of vehicles with semi-autonomous capabilities on the market. Tesla has its misleadingly named “Full Self-Driving Mode.” The Mustang Mache-E has some hands-free highway assistance features.

Drivers in semi-autonomous vehicles can be lulled into a false sense of security because “it feels like it’s driving you,” Keeler said. You might be tempted to check your email or fire off a quick text while the car handles the driving. But the car doesn’t know everything. If you’re not focused, it could create an error: “If you’re riding in the right-hand lane and there’s an exit lane coming up, it could follow the painted line to leave the highway,” Keeler explained.

Drivers who aren’t focused could end up getting in an accident while using these features. These risks could be compounded by road conditions. Many of these features use cameras to function, which could blur in rain, sleet or snow. “Who knows how well these systems are going to work in those conditions?” Keeler said. “It’s not flawless technology by any means.”

Commercial auto is already a challenging line. As carriers assess the risks of semi-autonomous vehicles, accounts that are using them are likely to see changes to their insurance policies. Vehicles with these capabilities are equipped with expensive technology that will drive up costs if a claim occurs.

“We’ve already seen challenges with auto profitability,” Keeler said. “This is just another headwind coming our way.”

3) Electric Bikes

E-bikes, which businesses may use in delivery services or recreation companies might deploy on trail tours, are known to cause fires due to their lithium-ion batteries, raising questions over who is liable for these malfunctions. Is it the bike manufacturer? The company that created the battery? The owner of the bike?

These bikes also have the potential to cause accidents. Many hiking trails ban motorized vehicles, but people and recreation companies are still taking e-bikes out on them, to the consternation of hikers and regular bike riders. What happens if someone on an e-bike causes an accident?

“If someone gets struck on a trail, there’s potentially going to be a lawsuit there,” Keeler said.

4) The Rise of Robotics in Manufacturing and Other Fields

Quick advances in technology have many workers questioning what all these new tools might mean for their futures. From Hollywood actors and writers to dock workers, striking unions have demanded that businesses slow the pace of automation.

“People are worried about job displacement,” Keeler said. “That worry is going to expand to evermore industry segments and job types. It’s not going away.”

Workers may rightfully have concerns over being replaced by robots. But will businesses heed them? “Any business is looking to cut costs,” Keeler said.

“Pretty soon, some restaurants may not even allow you to place an order verbally. It’s going to have to be through the computer interface. You could have restaurants where it’s people in a backroom cooking, and there’s no one on the front side of the restaurant.”

Employers should use caution before automating away their employees. Companies need not look further than retailers’ recent challenges with theft and self-checkouts to see a real-world example of the risks automation poses. Automation also raises the risks of manufacturing liability suits. As with AI, employers will need some way to safeguard these machines.

Approaching Emergent Technologies with Caution

Carriers are just beginning to understand the risks these new tools pose — and the effects they will have on the insurance industry. Until these technologies mature, underwriters will need to carefully assess the impact they could have on claims.

“It makes the underwriter’s job more difficult,” Keeler said. “None of these are easy, cut-and-dry exposures.”

Yet even as they face difficult exposures, many insurance companies are starting to use some of these new technologies themselves. AI has been heralded for its ability to help underwriters and adjusters. But depending on the technology too much poses its own dangers.

“Using artificial intelligence to underwrite entirely creates other challenges,” Keeler said. “I worry about people getting too dependent on artificial intelligence to think for them and then they lose that ability to have critical thinking skills and just outsource their brain to the computer.”

In the face of increasingly complicated technology exposures, insureds need to seek out carriers, like Philadelphia Insurance Companies, that are committed to tailoring policies to fit their clients’ needs through their Integrated Technology product.

“It really requires a lot of additional consideration and asking questions and really tailoring the insurance policy to the exposure,” Keeler said.

To learn more, please visit: https://www.phly.com/mplDivision/professionalLiability/IntegratedTechnology.aspx

 

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

Philadelphia Insurance Companies (PHLY) offers product-specific resources, alliances, and service capabilities to achieve a multi-faceted approach to risk management, including safety program development, site audits, and training (including interactive web-based training). We offer a wide range of products and value-added services at financial terms to be agreed upon to help you achieve your risk management goals.