July 18, 2018 by Tessie Sanci and Greg Dalgetty
Brokers should be proactive in asking clients about any involvement in sharing economy services, like ride-sharing or apartment-sharing, in order to protect themselves and their clients.
“Right now, there is some issue as to whether people are aware that [some policies] don’t cover [sharing economy activities], so that raises issues with respect to whether or not brokers may have liability if they don’t ask their clients [about these activities],” said Jonathan Meadows, partner at Harper Grey LLP.
Meadows has not yet seen cases in which individuals with denied claims related to sharing economy activities then sued their broker, but he encouraged brokers to learn more about their clients’ potential participation in this realm.
“Brokers should educate themselves about these issues because certainly if there are some losses, the enterprising plaintiff ’s counsel will be looking around to find out who they can go after,” said Meadows.
Brokers can also protect themselves by ensuring they understand all of the questions their clients are being asked when applying for a policy.
Drones could be the future of preventing flood damage, according to Eric Schillup, a senior risk services consultant with Zurich Canada.
Schillup envisions drones being put to use for flood mapping in the next five to 10 years. “When we equip drones with very sensitive elevation position sensors, we can get accurate topographical maps,” he noted.
Those maps could then be used to run flood simulations using data from storms of record to see if buildings would experience water incursion based on existing infrastructure.
“We can use this technology to start building up our flood defence systems so we can start preventing this from costing us, the insurers, and the clients impacted by surface water or flooding events,” Schillup said.
Property insurance providers should step up when it comes to covering the physical damages caused by cyber breaches, according to Lindsey Nelson, international cyber team leader at CFC Underwriting.
“It’s absolutely ridiculous that the property market will hide behind that electronic attack exclusion that they have on their policies,” Nelson said. “You’re forcing your clients to buy an entirely different form of insurance to address those exposures, whereas a more simple solution would be to remove the exclusion, understand it, embrace it and include it in your property policies.”
The cyber insurance market is growing but is still new in comparison to the property market, Nelson noted. Therefore, cyber insurers cannot respond to businesses’ physical equipment needs in addition to intangible losses such as reputation damage. A loss of $10 billion in property, for example, could “wipe out the entire cyber insurance market that isn’t, at this point in time, equipped to address these exposures,” Nelson said.
The idea of property insurers including coverage for cyber breaches into their policies is currently being discussed, said Jacqueline Detablan, vice-president of financial lines at AIG. However, she acknowledged the property market’s hesitancy in embracing cyber breach coverage, as cyber losses can affect one company in multiple locations.
Commercial brokers could soon find the nature of their work changing, according to Brian Parsons, president and CEO of Willis Towers Watson Canada.
“Our roles as brokers are going to change,” Parsons said, speaking at the CEO panel plenary. “Right now we talk to clients and prospects and do lots of consultative work to get to the transaction. Because right now, that’s how brokers make their money, for the most part.”
But, Parsons noted, millennials are less interested in the transactions brokers can help them make and more interested in the consultative services a broker can provide.
“They want that quantitative analysis,” he said. “They want to know how the sausage is made—not just the delivery of the sausage.”
Parsons envisioned a day where brokers are compensated primarily for their value as consultants. “We’re going to get compensated not because of the transaction— that would be table stakes—but because of the consultative process and getting to a transaction,” he said.
As autonomous vehicles start cropping up on roadways, they’re posing a number of new risks.
“The most obvious concern about autonomous vehicles—I think it’s probably shared universally—is the cyber security risk,” said George R. Wray, a partner at the law firm Borden Ladner Gervais LLP.
Wray pointed out that the potential for hackers to access a vehicle could lead to disastrous consequences. “The absolute worst possible scenario is someone hacks in, takes charge of your vehicle while you’re in it and…takes you somewhere that you don’t want to go—for example, off a cliff,” he said.
Jim Kidd, a project manager with the City of Toronto’s insurance and risk management section, added that assessing liability will pose challenges when autonomous vehicles become more widespread.
“How liability is assessed now is well established, but autonomous technology will change that,” Kidd said. “There are so many parties to attribute liability to: technology failure, product liability. Was it the software? Was it the hardware? Did the technology fail to prevent a collision?”
An increase in class action lawsuits stemming from cyber breaches could underscore the need for cyber insurance, according to Brian Rosenbaum, the senior vice-president of Aon’s Financial Services Group.
Rosenbaum estimates that there have been about 15 cyber claims paid in Canada in recent years. Most of those have been first-party claims, but thirdparty claims could be on the rise in the wake of mounting class actions, he noted.
“There are probably 36 class actions that are pending or are already going forward,” Rosenbaum said. “I think you’re going to see a sea change in third-party actions going forward, and you’re going to need the insurance even more for defence costs and settlements.”
Copyright © 2017 Transcontinental Media G.P. This article first appeared in the October 2017 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.