Risk Insider: Kevin Kalinich

Risky Things

By: | August 27, 2015 • 2 min read
Kevin Kalinich is the global cyber risk practice leader for Aon Risk Solutions, focusing on identifying exposures and developing insurance solutions. He can be reached at riskletters@lrp.com.

Some of us are old enough to remember when our stand-alone computers first became networked with other computers. Who over 40 years old doesn’t recall sending and receiving that first email?

That profound technological development – networked computing – brought enormous advantages but also set the stage for security concerns, like viruses and malware, which can be an Achilles heel of computer technology.

With the rise of the Internet of Things (IoT), we find that it is more than just our computers that are connected. Our homes, possessions and even our physical bodies are becoming connected.

Many IoT products can actually reduce exposures.

Arrays of smart, sensor-equipped, connected devices that collect and digitize a wide variety of data are already being used, with exponentially more in development.

Literally tens of billions of “things” containing sensors – cars, homes, medical devices – will be connected in the next several years. A range of twenty to 50 billion of these “things” are estimated to be installed by 2020, with a vast amount more to follow.

An example is car manufacturers’ strategies to sell “tires as a service.” The car manufacturers use embedded technology to detect tire wear and under-inflation, which improves service and increases safety.

The IoT phenomenon is unfolding faster than developers can address the accompanying security vulnerabilities and risk management concerns. We are living in a new world in which our “things” can tattle on us, compromise our privacy or even harm us.

While telematics in vehicles or home appliances may seem helpful when we need roadside assistance or to diagnose maintenance issues, they can also report our speed or our diet, which to some may seem invasive.

Drones, hidden cameras and driverless cars once seemed like fantasy objects in a futuristic world, but suddenly that future is here, and it is unclear how liability would be assigned when one of these “things” misbehaves or is used to harm another.

On the contrary, not all IoT innovations are necessarily harmful. Many IoT products can actually reduce exposures. Home automation startups being incubated by Microsoft Ventures carry a number of safety benefits, such as turning off your stove or protecting your home from water damage.

IBM just announced a $3 billion investment in IoT and is launching a multitude of services that will help make us safer, such as alerting car insurance policyholders of storms to help prevent damage. So it’s important to remember that IoT exposures are not necessarily negative, just different.

With the increased use of internet-connected devices, however, new types of exposures have arisen to increase the possibility of certain damages. This creates an enterprise risk management challenge as businesses seek to harness the exciting potential of this evolving technology while managing the related cyber threats.

The data gathered by IoT is often quite vulnerable. According to a study by HP, it’s estimated that 70 percent of the most commonly used devices contain serious vulnerabilities. Potential concerns include a dangerous hacker disabling a life-sustaining medical device, the brakes in an automobile, or aviation systems from Wi-Fi or power grids.

As it has repeatedly done throughout history, our ability to create new technology is opening up worlds of opportunity. It’s also creating new types of risk.

Plaintiffs’ attorneys will look to those involved in the design, production, delivery and servicing of the IoT device that allegedly causes economic loss, bodily injury or tangible property damage.

While it is impossible to predict the exact impact of the IoT on the insurance industry, this much is clear: future IoT evolution will force the insurance industry to better clarify where coverage starts and stops under each type of policy.

More from Risk & Insurance

More from Risk & Insurance

2018 Risk All Stars

Stop Mitigating Risk. Start Conquering It Like These 2018 Risk All Stars

The concept of risk mastery and ownership, as displayed by the 2018 Risk All Stars, includes not simply seeking to control outcomes but taking full responsibility for them.
By: | September 14, 2018 • 3 min read

People talk a lot about how risk managers can get a seat at the table. The discussion implies that the risk manager is an outsider, striving to get the ear or the attention of an insider, the CEO or CFO.

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But there are risk managers who go about things in a different way. And the 2018 Risk All Stars are prime examples of that.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Goodyear’s Craig Melnick had only been with the global tire maker a few months when Hurricane Harvey dumped a record amount of rainfall on Houston.

Brilliant communication between Melnick and his new teammates gave him timely and valuable updates on the condition of manufacturing locations. Melnick remained in Akron, mastering the situation by moving inventory out of the storm’s path and making sure remediation crews were lined up ahead of time to give Goodyear its best leg up once the storm passed and the flood waters receded.

Goodyear’s resiliency in the face of the storm gave it credibility when it went to the insurance markets later that year for renewals. And here is where we hear a key phrase, produced by Kevin Garvey, one of Goodyear’s brokers at Aon.

“The markets always appreciate a risk manager who demonstrates ownership,” Garvey said, in what may be something of an understatement.

These risk managers put in gear their passion, creativity and perseverance to become masters of a situation, pushing aside any notion that they are anything other than key players.

Dianne Howard, a 2018 Risk All Star and the director of benefits and risk management for the Palm Beach County School District, achieved ownership of $50 million in property storm exposures for the district.

With FEMA saying it wouldn’t pay again for district storm losses it had already paid for, Howard went to the London markets and was successful in getting coverage. She also hammered out a deal in London that would partially reimburse the district if it suffered a mass shooting and needed to demolish a building, like what happened at Sandy Hook in Connecticut.

2018 Risk All Star Jim Cunningham was well-versed enough to know what traditional risk management theories would say when hospitality workers were suffering too many kitchen cuts. “Put a cut-prevention plan in place,” is the traditional wisdom.

But Cunningham, the vice president of risk management for the gaming company Pinnacle Entertainment, wasn’t satisfied with what looked to him like a Band-Aid approach.

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Instead, he used predictive analytics, depending on his own team to assemble company-specific data, to determine which safety measures should be used company wide. The result? Claims frequency at the company dropped 60 percent in the first year of his program.

Alumine Bellone, a 2018 Risk All Star and the vice president of risk management for Ardent Health Services, faced an overwhelming task: Create a uniform risk management program when her hospital group grew from 14 hospitals in three states to 31 hospitals in seven.

Bellone owned the situation by visiting each facility right before the acquisition and again right after, to make sure each caregiving population was ready to integrate into a standardized risk management system.

After consolidating insurance policies, Bellone achieved $893,000 in synergies.

In each of these cases, and in more on the following pages, we see examples of risk managers who weren’t just knocking on the door; they were owning the room. &

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Risk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, clarity of vision and passion.

See the complete list of 2018 Risk All Stars.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.