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2016 Most Dangerous Emerging Risks

Gene Editing: The Devil’s in the DNA

Biotechnology breakthroughs can provide great benefits to society, but the risks can’t be ignored.
By: | April 4, 2016 • 8 min read

SCENARIO: The Verde avocado was one of several fruits introduced by biotech pioneer AgriBoundless. The Verde was a biotech success story — a genetically edited variety with flesh that was very slow to brown after cutting.

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Restaurants and other establishments across the food service spectrum gave Verde the thumbs-up for helping to cut down waste caused by the short shelf-life of avocados — a popular but costly ingredient. National Tex-Mex chain Meximillion was the largest purchaser of Verde, ordering them chain-wide after a brief trial in numerous California locations.

Nearly a year after its introduction, however, a paper published by UC San Diego School of Medicine’s immunology division traced a series of mysterious allergy cases back to the Verde avocado.

Only a small percentage of people developed an allergy to the Verde avocado, but it was enough for a sizable class action.

The paper sparked a flurry of interest from immunologists across the country grappling with similar cases.

Agriculture officials ordered a recall of Verde, pending an investigation. Meximillion and other establishments struggled to secure alternate suppliers. Restaurants in some regions had to take guacamole and other popular items off of their menus.

The investigation wasn’t yet complete when the lawyers came knocking. Only a small percentage of people developed an allergy to the Verde avocado, but it was enough for a sizable class action.

A few of the affected consumers, including one child, nearly went into anaphylactic shock. AgriBoundless and its distributors were named in the suit, as well as Meximillion and four other restaurant chains.

Long before the case ever got to trial, Meximillion was tried and found guilty in the court of public opinion for putting genetically edited food on its menu. Its actions conflicted with its brand, which was wrapped around its fresh and natural ingredients and its “No to GMO” stance.

A crisis management team immediately launched an educational campaign to help people understand that the Verde avocado was non-GMO, but the public presumed that even if it wasn’t GMO, it had to be just as bad.

Competitors were eager to let their customers know that they only used “real” avocados.

The next meeting of Meximillion’s shareholders was a grim one indeed.

ANALYSIS: In a 1923 essay, scientist J. B. S. Haldane imagined the invention of a purple alga called Porphyrococcus, which so accelerated wheat yields that it led to a food glut, virtually collapsing the economy of agricultural states.

In Haldane’s scenario, an errant strain of the algae escaped into the ocean and multiplied, creating so many nutrients that it resulted in an explosion of the fish population.

Oh, by the way, it also turned the ocean purple, permanently.

Haldane was ahead of his time, yet no prophet … the Atlantic remains blue. But just shy of a century later, the science that Haldane imagined is our reality.

New organisms like Haldane’s purple algae are being created from scratch by mankind rather than Mother Nature. And mankind is taking nature’s existing creations and altering their genetic structure to better suit our needs. Thanks to recent advances, these feats can be accomplished with stunning speed and at less cost than ever before.

The discovery of a system known as Crispr-Cas9 is a massive lunge forward in biotechnology. Crispr-Cas9 is a like a DNA scissor — a genetic equivalent of the find and replace function of a word processor. It gives scientists the ability to delete or swap out pieces of a genome in order to change or eliminate traits.

A snip here, a snip there and voila — two bulls born recently in Iowa will never grow horns. Neither will their offspring. What used to take many generations to accomplish via selective breeding can be achieved in just one, with more precision.

Crispr-Cas9 is also a game-changer because it makes genome editing accessible to an unprecedented degree. An edited genome can now be produced in a matter of days. And the process is so straightforward that a grad student can master it in about hour, say scientists.

UC Berkeley biochemist Jennifer Doudna explains what Crispr-Cas9 is and what researchers hope to accomplish with it.

The possibility for advances in medicine and pharmaceuticals is breathtaking. Scientists are hard at work on projects such as engineering cancer patients’ immune cells to more effectively attack tumors.

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A company called Intrexon may be on the verge of editing out the ability to transmit the Zika virus in the wild mosquito population.

Man-made yeasts and algae are being tested to produce everything from new biofuels to cosmetic oils to “natural” vanilla flavoring.

Synthetic yeasts in development are being tested for their ability to change the flavor of yogurt, bread, beer and pickles. Gene editing is being tested for its ability to edit fruits and vegetables to increase their edible flesh, resist browning and retard ripening.

“We, as responsible members of the risk management community, want to encourage a balance. We want to encourage innovation.”— Walker Taylor, managing director, life sciences practice, Arthur J. Gallagher & Co.

Gene-editing research on animals is yielding stunning results. Scientists produced pigs that are easier to fatten up, cattle that produce more tender meat (and more of it), cashmere goats that grow longer hair, and chickens that produce only female offspring for egg-laying, among many other apparently successful improvements upon what nature created.

Keep in mind that the first synthetic genome was created in 2010, and Crispr-Cas9’s true potential came to the fore just two years later — these breakthroughs haven’t even scratched the surface of what may come.

Evolving Regulation

Debates and hand-wringing are in full swing over human genome editing as well as the potential bioweapon applications of gene editing and synthetic biology (synbio). But threats related to commercial applications are no less controversial, from the possible effects on human health to concerns about the environment and biodiversity.

“We would expect such products to be thoroughly tested at every stage of their development,” said an insurance executive, “but there are no guarantees — you can never completely eliminate the risk that they might interact with the wider environment in unexpected ways.”

A complex regulatory environment is expected to keep the risk level in check for medical and pharmaceutical industries. But the regulation of agricultural and food products is a very different process.

“Remember Olestra? They put it out in the food chain and then went, ‘Whoa! This is not good for our bodies.’ ”— Sandie S. Mullen, senior vice president, national life science practice leader, RT Specialty

Established regulatory environments do address biotechnology products. From a risk management standpoint, experts noted it should be reassuring to insurers and others that these technologies “are not operating in a regulatory vacuum.”

There are subtleties still to be sorted out, however. While an edited genome is modified, it is not currently considered GMO. That distinction is reserved for organisms with foreign DNA added to their own. Edited genes contain no foreign DNA. The result is the same species, just altered somewhat.

Current regulatory structures don’t address this kind of modification, so edited genomes are not subject to the more stringent approval process that governs GMOs. The U.S. Department of Agriculture is studying Crispr-Cas9 and plans to make recommendations in the near future.

Sandie S. Mullen, senior vice president, national life science practice leader, RT Specialty

Sandie S. Mullen, senior vice president, national life science practice leader, RT Specialty

In the meantime, seemingly benign products of biotechnology will quietly work their way through the agricultural and manufacturing sectors, into our homes and businesses as well as onto our plates. If there are problems, they will eventually make themselves known.

“Remember Olestra?” asked Sandie S. Mullen, senior vice president, national life science practice leader with RT Specialty. “They put it out in the food chain and then went, ‘Whoa! This is not good for our bodies.’ ”

As long as a product is deemed generally safe for the public, it’s going to be sold.

“If you come up with a new vanilla or a new oil, you can put it out in the marketplace. And if it doesn’t immediately cause [harm], it could be out in the marketplace for years,” said Mullen, also citing asbestos as an obvious example of how significant hazards can lurk in the shadows.

Current regulations, however, could soon change the way companies weigh the use of biotech products in their own operations.

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In July of 2015, the White House directed the EPA, FDA and USDA to overhaul the federal Coordinated Framework for Regulation of Biotechnology, which has not been updated since 1992.  As part of that directive, the agencies were to develop a strategy “to ensure that the federal regulatory system is well-equipped to assess efficiently any risks associated with the future products of biotechnology.” The first public meeting on the update was held this past October.

For now, products created through synthetic biology or gene editing technology are considered distinct from GMOs and don’t need to be labeled as such, allowing manufacturers to avoid association with the GMO stigma that has been created by the media and certain public interest groups.

But the lack of transparency could eventually backfire, as in our avocado scenario. If the information is made public unexpectedly, the potential for reputational risk can be quite severe.

Insurers’ Key Role

Though in its infancy, this science has the attention of numerous industries. This presents some thorny challenges for risk managers and insurers. Risk managers will need to weigh the specific benefits of biotech products against their potential risks — no easy feat when the risks are largely unknown.

In gene editing, the problem of “off-target mutations” is well established. Scientists are already making strides in reducing these mutations, but there’s no ironclad guarantee that some latent mutation won’t produce an unforeseen effect down the road.

Walker Taylor, area president, managing director of the life sciences practice, Arthur J. Gallagher & Co.

Walker Taylor, area president, managing director of the life sciences practice, Arthur J. Gallagher & Co.

Switching to a biotech ingredient could yield significant cost savings, but companies must be open to discussing the possible latent issues that might arise with brokers and carriers.

“We’re talking about risks that are low frequency, high severity — I think this industry presents a lot of that,” said Walker Taylor, area president and managing director of the life sciences practice at Arthur J. Gallagher & Co.

“It makes good sense for the insurance industry to be involved in these issues,” he said.

While these newer products of biotechnology may be distinct from GMOs, experts say that insurers are likely to take a similar approach, applying their experience with genetic engineering to gene editing and synbio.

“We have never excluded GMOs completely from our policies,” said Dr. Markus Kalin, head of global casualty risk engineering at XL Catlin, “and I think we would apply a similar approach to synthetic biology.”

Kalin pointed out that GMOs once posed a similar degree of unknown risk and fears of hidden dangers. Overwhelmingly though, “those fears have not been realized in this field.”

Taylor noted that the system of checks and balances in insurance allow it to undertake such risks in a controlled fashion, and the important part it will play as science advances.

“We, as responsible members of the risk management community, want to encourage a balance. We want to encourage innovation,” Gallagher’s Taylor said. &

BlackBar

2016’s Most Dangerous Emerging Risks

brokenbridgeThe Fractured Future Infrastructure in disrepair, power grids at risk, rampant misinformation and genetic tinkering — is our world coming apart at the seams?

01b_cover_story_crackCrumbling Infrastructure: Day of Reckoning Our health and economy are increasingly exposed to a long-documented but ignored risk.

01c_cover_story_leadCyber Grid Attack: A Cascading Impact The aggregated impact of a cyber attack on the U.S. power grid causes huge economic losses and upheaval.

01d_cover_story_vaccineFragmented Voice of Authority: Experts Can Speak but Who’s Listening? Myopic decision-making fostered by self-selected information sources results in societal and economic harm.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.