Risk Insider: Joe Tocco

Ocean Warming Risk: Why Does it Matter to Insurance?

By: | October 4, 2016 • 2 min read
Currently Chief Executive of the Americas for XL Catlin’s insurance operation, Joe Tocco has enjoyed three decades in the insurance industry at various organizations. He is also a veteran of the U.S. Navy, where he served as a nuclear field service engineer. He can be reached at [email protected]

One of the things I’ve seen firsthand in my insurance career is the interrelated nature of risks; they rarely occur in isolation. A loss in one area often triggers or exacerbates others. Such is also the nature of our environment, where we are observing disturbing changes.

I was fortunate to have served in the U.S. Navy and have been awed ever since by the oceans’ vastness, power and complexity. Understanding the oceans is difficult. Astonishingly, humans have spent 100 times more hours on the moon than in the deepest part of Earth’s oceans.

A new report on ocean warming by the International Union for Conservation of Nature (IUCN), titled Explaining ocean warming: Causes, scale, effects and consequences describes the phenomenon as ‘one of the greatest hidden challenges of our generation.’ The analysis report has been compiled by 80 scientists from 12 countries.

Even though our planet has enough land area to accommodate more than 7 billion people, 71 percent of its surface is covered by water. Oceans have a critical influence on life as we know it – heating and cooling the planet, providing food and supporting global commerce, yet we have only recently started to understand them.

If science and nations are to mitigate climate change, we must clearly grasp how the decline in coral reef health, loss of polar ice, ocean warming, sea level rise and ocean acidification are affecting the people and property that the insurance industry helps to protect.

The report, which is sponsored by XL Catlin’s Deep Ocean Survey initiative, is the third in a series of scientific research programs to better understand the key indicators of climate change. One of the missions of the Survey is to pilot a systematic method for scientists around the world to assess ocean health. What we are learning so far has been startling:

  • Sea levels have risen about 20 centimeters (about 8 inches) since pre-industrial times. If carbon dioxide emissions continue at their current pace, sea levels will rise a further 99 cm (39 inches) by 2100.
  • Many of the world’s largest cities, including New York and London, are exposed to flooding from sea level rise.
  • Hundreds of millions of people will be forced to relocate if sea levels rise at the current rate.
  • In the United States alone, $500 billion of coastal property could be below sea level by the end of this century.
  • The ocean absorbs excess heat and carbon dioxide, and far more of that heat is now buried in the deep ocean, below 700 meters, than was found 20 years ago.
  • CO2 dissolves in seawater to form carbonic acid, increasing acidity. Since the beginning of the industrial revolution around 1750, the acidification of the ocean has increased 30 percent. That change has led to the destruction of coral reefs and many marine species.

Why should the insurance industry care about ocean warming? For one thing, we are in the risk business, and ocean warming represents enormous risks. To manage any risk, we first have to understand it.

If science and nations are to mitigate climate change, we must clearly grasp how the decline in coral reef health, loss of polar ice, ocean warming, sea level rise and ocean acidification are affecting the people and property that the insurance industry helps to protect.

As an industry built on managing risk, we must continue to study the risks facing our planet from climate change and work together to mitigate their effects. Let’s use our expertise in analyzing risk and helping rebuild lives and livelihoods to preserve opportunities for future generations.

Robotics Risk

Rise of the Cobots

Collaborative robots, known as cobots, are rapidly expanding in the workforce due to their versatility. But they bring with them liability concerns.
By: | May 2, 2017 • 5 min read

When the Stanford Shopping Center in Palo Alto hired mobile collaborative robots to bolster security patrols, the goal was to improve costs and safety.

Once the autonomous robotic guards took up their beats — bedecked with alarms, motion sensors, live video streaming and forensics capabilities — no one imagined what would happen next.

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For some reason,  a cobots’ sensors didn’t pick up the movement of a toddler on the sidewalk who was trying to play with the 5-foot-tall, egg-shaped figure.

The 300-pound robot was programmed to stop for shoppers, but it knocked down the child and then ran over his feet while his parents helplessly watched.

Engaged to help, this cobot instead did harm, yet the use of cobots is growing rapidly.

Cobots are the fastest growing segment of the robotics industry, which is projected to hit $135.4 billion in 2019, according to tech research firm IDC.

“Robots are embedding themselves more and more into our lives every day,” said Morgan Kyte, a senior vice president at Marsh.

“Collaborative robots have taken the robotics industry by storm over the past several years,” said Bob Doyle, director of communications at the Robotic Industries Association (RIA).

When traditional robots joined the U.S. workforce in the 1960s, they were often assigned one specific task and put to work safely away from humans in a fenced area.

Today, they are rapidly being deployed in the automotive, plastics, electronics assembly, machine tooling and health care industries due to their ability to function in tandem with human co-workers.

More than 24,000 robots valued at $1.3 billion were ordered from North American companies last year, according to the RIA.

Cobots Rapidly Gain Popularity

Cobots are cheaper, more versatile and lighter, and often have a faster return on investment compared to traditional robots. Some cobots even employ artificial intelligence (AI) so they can adapt to their environment, learn new tasks and improve on their skills.

Bob Doyle, director of communications, Robotic Industry Association

Their software is simple to program, so companies don’t need a computer programmer, called a robotic integrator, to come on site to tweak duties. Most employees can learn how to program them.

While the introduction of cobots into the workplace can bring great productivity gains, it also introduces risk mitigation challenges.

“Where does the problem lie when accidents happen and which insurance covers it?” asked attorney Garry Mathiason, co-chair of the robotics, AI and automation industry group at the law firm Littler Mendelson PC in San Francisco.

“Cobots are still machines and things can go awry in many ways,” Marsh’s Kyte said.

“The robot can fail. A subcomponent can fail. It can draw the wrong conclusions.”

If something goes amiss, exposure may fall to many different parties:  the manufacturer of the cobot, the software developer and/or the purchaser of the cobot, to name a few.

Is it a product defect? Was it an issue in the base code or in the design? Was something done in the cobot’s training? Was it user error?

“Cobots are still machines and things can go awry in many ways.” — Morgan Kyte, senior vice president, Marsh

Is it a workers’ compensation case or a liability issue?

“If you get injured in the workplace, there’s no debate as to liability,” Mathiason said.

But if the employee attributes the injury to a poorly designed or programmed machine and sues the manufacturer of the equipment, that’s not limited by workers’ comp, he added.

Garry Mathiason, co-chair, robotics, AI and automation industry group, Littler Mendelson PC

In the case of a worker killed by a cobot in Grand Rapids, Mich., in 2015, the worker’s spouse filed suit against five of the companies responsible for manufacturing the machine.

“It’s going to be unique each time,” Kyte said.

“The issue that keeps me awake at night is that people are so impressed with what a cobot can do, and so they ask it to do a task that it wasn’t meant to perform,” Mathiason said.

Privacy is another consideration.

If the cobot records what is happening around it, takes pictures of its environment and the people in it, an employee or customer might claim a privacy violation.

A public sign disclosing the cobot’s ability to record video or take pictures may be a simple solution. And yet, it is often overlooked, Mathiason said.

Growing Pains in the Industry

There are going to be growing pains as the industry blossoms in advance of any legal and regulatory systems, Mathiason said.

He suggests companies take several mitigation steps before introducing cobots to the workplace.

First, conduct a safety audit that specifically covers robotics. Make sure to properly investigate the use of the technology and consider all options. Run a pilot program to test it out.

Most importantly, he said, assign someone in the organization to get up to speed on the technology and then continuously follow it for updates and new uses.

The Robotics Industry Association has been working with the government to set up safety standards. One employee can join a cobot member association to receive the latest information on regulations.

“I think there’s a lot of confusion about this technology and people see so many things that could go wrong,” Mathiason said.

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“But if you handle it properly with the safety audit, the robotics audit, and pay attention to what the standards are, it’s going to be the opposite; there will be fewer problems.

“And you might even see in your experience rating that you are going to [get] a better price to the policy,” he added.

Without forethought, coverage may slip through the cracks. General liability, E&O, business interruption, personal injury, cyber and privacy claims can all be involved.

AIG’s Lexington Insurance introduced an insurance product in 2015 to address the gray areas cobots and robots create. The coverage brings together general and products liability, robotics errors and omissions, and risk management services, all three of which are tailored for the robotics industry. Minimum premium is $25,000.

Insurers are using lessons learned from the creation of cyber liability policies and are applying it to robotics coverage, Kyte said.

“The robotics industry has been very safe for the last 30 years,” RIA’s Doyle said. “It really does have a good track record and we want that to continue.” &

Juliann Walsh is a staff writer at Risk & Insurance. She can be reached at [email protected]