Risk Insider: Jack Hampton

The Changing Concept of Privacy

By: | December 7, 2016 • 2 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

Classical Chinese Mandarin had no word that conveyed the modern meaning of privacy. Its closest term conveyed a message close to “shameful secret,” as when a person wanted to hide a disgraceful behavior from others.

Everybody knows the meaning of “privacy.” It is freedom from being observed or disturbed by others. Legally, it is a right to control access to our personal information.

Is the issue of privacy about to change as a major theme in our society?

We can ask German Chancellor Angela Merkel, “Did you feel violated when you learned the U.S. National Security Agency listened to and recorded your cell phone conversations?”

We could contact 32 million members of Ashley Madison, the commercial website that facilitates discreet sexual affairs for married adults. Did bad things happen after the release of their full names, home addresses, and credit card transactions?

We might be curious about what happened to Ashley Madison’s clients in Saudi Arabia where adultery is a crime punishable by death.

Curiosity is one thing. Managing the exposure from a privacy breach is a potential disaster.

Risk managers are concerned about privacy violations that increasingly are coming from out of nowhere. We should be concerned too.

Ask Erin Andrews, the ESPN reporter who was videotaped naked in her hotel room. A jury verdict was $55 million from Marriott for violation of privacy.

You can’t ask Tyler Clementi, an 18-year-old student at Rutgers University. He jumped to his death from the George Washington Bridge after his roommate used a webcam and shared an Internet video of Clementi kissing another man.

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Privacy violation is big business. The collection of our private data is a $300 billion-a-year industry employing millions of people in the United States. They gather information without regard to how it will be used. They digitally scour Facebook for information about people going on vacation, match it with email addresses, and sell it to vendors in destination locations who promote events for tourists. Unintentionally, the information can wind up in the hands of burglars who break into empty homes.

Elsewhere, recruiters uncover personal data not volunteered in applications for employment. Unscrupulous proprietary schools identify financially struggling students and put them into debt pursuing programs they will not complete.

The quest for sensitive data and other secrets is part of a new discipline called “business analytics.”

Privacy violation is big business. The collection of our private data is a $300 billion-a-year industry employing millions of people in the United States. They gather information without regard to how it will be used.

The definition is quite harmless. It refers to continuous and repeated exploration and investigation of data to improve performance.

It uses the availability of the massive amount of data collected by companies, governments, and other parties who have little or no respect for privacy.

The situation is complicated because we actually train people to violate privacy. Business analytics is a “hot” academic program on college campuses. Students learn how to pore through our personal lives to create “meaning” that will be used for or against us by complete strangers.

What is the reality of personal privacy? It’s gone.

Politicians use business analytics to find friendly voters. The media tracks down hidden stories that inform, entertain, or titillate. Lawyers pursue clients. Employers dig for conflicts of interest. Netflix manages its business based on our viewing patterns.

Everybody is sharing the data. Nobody is taking much time to respect privacy.

We might conclude with a mission statement that could apply to a modern company.

“We have to be forthright with our customers. We must earn their confidence. We have to show them we care about them and will protect them. Then, we can find their shameful secrets and invade their privacy.”

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]