Robotics in the Workplace

Helping Hands?

Robotics will forever change the landscape of the U.S. workplace. That may create new liability concerns and eliminate others.
By: | October 15, 2014 • 10 min read

It’s probably way too soon to start dreaming up insurance products that will respond to the risk that robots are going to rise up and annihilate humankind. And good luck finding the market capacity for it anyway.

However, robots and robotics are fast becoming a fixture of our reality, and the industry is poised for rapid expansion.

Advertisement




Robots, in some form or another, have been present in the manufacturing sector since 1962, when a New Jersey General Motors factory began using a robot to do spot welding and extract die castings. By the ’70s, increasingly sophisticated machines, operated by minicomputers, were being widely used for small parts assembly.

Robotics have long since moved away from the assembly line. Robots are present everywhere from warehouses to hospitals, from farms to laboratories, and from the military to mines and more.

One of the latest robotic forays into the workplace is at the Aloft hotel in Cupertino, Calif., where “The Botlr” — a service robot that looks like a distant cousin of R2-D2 — is being used to make small deliveries to guests’ rooms. Robots may soon be flipping your burgers or picking the grapes that make your favorite wine.

Video: The Botlr, a robotic bellhop built for Aloft Hotels, delivers an item to a guest in his room.

But the application of robotics is going ever deeper.

The development of robots connected to the Internet, big data, the cloud and advanced computing technology such as artificial intelligence (AI) algorithms are bringing a new class of robots into the workplace — those that can sense, think and act based on specific data and sensory input, and make routine decisions.

In June, the Associated Press began experimenting with having machines write short business stories. The news organization said that eventually, the majority of its U.S. corporate earnings stories would be produced using automation. (As of press time, Risk & Insurance® is not yet employing robotic journalists.)

There are obvious positives to the growth of robotics in the workplace. It makes sense to give robots the high-turnover jobs that are mind-numbingly rote, as well as those jobs and tasks considered extremely dangerous.

But the change that is coming may be far more profound. Garry Mathiason, co-chair of the Robotics, Artificial Intelligence and Automation practice group at Littler Mendelson in San Francisco, cited a 2013 study published by the Oxford Martin School, examining automation potential across the U.S. labor market.

According to the study, said Mathiason, “47 percent of jobs currently done by people in the United States will be done by machines and software within one to two decades. That doesn’t mean there’s going to be 50 percent unemployment; it does mean there’s going to be that much change taking place.”

(For the record, the Oxford Martin study said that insurance underwriters are in the highest risk category for being taken over by automation, just ahead of claims and policy processing personnel, claims adjusters, examiners and investigators.)

“2010 was a turning point in terms of the acceleration of the technology and its implications,” said Mathiason. “There is a change taking place that will be the equivalent of the Internet in terms of what it will do to the workplace.”

Video: At the fulfillment center of North Reading, Mass.-based Kiva Systems, 100 robots work alongside 300 fulfillment associates.

Pointing Fingers

So far though, companies that employ robots see the importance of having human checks and balances on the robots’ work. Many companies are actually increasing staffing levels to support their robotic equipment.

That raises concerns about whether employees are at increased risk of harm by robotic equipment, or may inadvertently interfere with safe robotic operations. A fair number of workplace fatalities related to robotics have occurred in the last decade or two.

As it stands, employers are covered by existing workers’ comp statutes if a robot were to cause a workplace injury or fatality, the same as they would be in the event of an injury or death caused by any other piece of equipment.

Advertisement




The same would not be true, however, if a robot were to injure a customer, a vendor or any other visitor to a facility. In those cases, who can expect to face a lawsuit? The answer, for now, is: It depends.

Liability issues get sketchy when you factor in the element of closed versus open robotics.

In a closed robotics system, a robot is designed and manufactured for one specific purpose. (iRobot’s Roomba, for instance, is a vacuum — period — no matter how many YouTubers use it as an amusement park ride for their cats.)

But with an open robotic system, independent developers would be able to create programs, or apps, to allow the system to accomplish different user-defined tasks, adding more potential culprits in the event of a claim.

“This is going to be a big issue,” said Stephen Wu, an attorney who is of counsel to Silicon Valley Law Group based in San Jose, Calif.

“[In the event of a robot-related accident], I’m going to be doing an investigation and using experts to determine the root cause. Was it my own environment? Was it the hardware manufacturer? Was it the firmware manufacturer? Was it the application software? Was it the operating system manufacturer? Or was it some subcomponents thereof? Or else … was it a data service provider [such as one providing mapping data]?”

These questions will grow still more complicated with the growth of adaptive technology — meaning when robots make decisions on their own based on the data and sensory input they receive.

“Increasingly, adaptive intelligence is being built in where the robot is going to be changing what it does based on external stimuli,” said Drew Haaser, U.S. technology practice leader for Marsh.

“Let’s say it’s putting welds on an auto and it’s been programmed to sense the properties of the materials it’s welding and adapt … . If it makes the wrong decision — what are going to be the legal implications to that?”

That question reaches a whole other level when the consequence is a loss of life.

“What if you have a robot that is … facing the decision to either run over your daughter or hit a school bus full of kids, what is the right thing to do in that situation?” asked David Beyer, managing member of Digital Risk Resources.

“I think that it’s a very complex issue. … They try to think through a lot of these situational risks but you can’t predict all the risks all the time.”

“I think what we’re going to see is that all parties are going to be drawn into these lawsuits. They’re all going to have their feet put to the fire and they’re all going to point at each other. Unfortunately, a jury is going to have to decide these things.” — David Beyer, managing member, Digital Risk Resources

It’s crucial, said Guy Fraker, that we remember robotics is not synonymous with infallible.

“You can say, ‘We can fix that with an algorithm.’ But can you program for that kind of variability in advance? No,” said Fraker, former director of business trends and foresight for State Farm and co-founder and CEO of consultancy Autonomous Stuff.

Advertisement




“We’re learning new things about the technology every day.”

“These are not dumb devices anymore,” said Haaser, “and when they make mistakes in how they interpret stimuli, is it a professional liability error in the design of the product or in the software as opposed to a straightforward bodily injury/property damage claim?”

As more businesses incorporate adaptive technology into the workplace and robotics follow cues based on what they’re learning in their environments, the more that risk management will be expected to have thought through all of the implications of how the robot or robotic systems might respond.

Eventually, there will be cases where robots make “correct” decisions that result in tragic outcomes.

Several experts cited the example of a driverless car faced with a choice of hitting a tractor trailer or hitting an occupied baby stroller. Most assume that the car would attempt to minimize damage by hitting the stroller.

In a case like that, “Was it a mistake? Well, no,” said Haaser.

“Was it what a human with a duty to care would have done? No! And how will the courts treat that? Unfortunately, there are a whole lot of questions and not a whole lot of answers yet as to how the courts will treat that.”

“I think what we’re going to see,” said Beyer, “is that all parties are going to be drawn into these lawsuits.

“They’re all going to have their feet put to the fire and they’re all going to point at each other. Unfortunately, a jury is going to have to decide these things.”

Human Augmentation

The extremely good robotics news is that a great many of the developments coming out of the industry have the potential to decrease employer exposure rather than increase it.

In particular, advances in exoskeleton technology are moving to the forefront, even gaining a global stage during the 2014 World Cup, when a young paraplegic man made the first official kick of the event, wearing a mind-controlled robotic exoskeleton.

Video: Juliano Pinto, 29-year-old paraplegic man, successfully made the first kick of the 2014 World Cup in Sao Paulo, wearing a full body robotic suit.

In South Korea last year, employees of Daewoo Shipbuilding and Marine Engineering helped test a prototype of a full-body exoskeleton that will enable them to lift large hunks of metal, pipes and other objects without excess exertion or risk of strain or injury.

“In basic safety and loss control, the first line of defense is to engineer the risk out; robotics is one of the purest forms of ‘engineering out’ a risk,” said Bill Spiers, vice president and risk consulting manager, Lockton Cos.

Bill Spiers, vice president and risk consulting manager, Lockton Cos.

Bill Spiers, vice president and risk consulting manager, Lockton Cos.

“You have eliminated the human interaction around a task that’s going to create soft tissue strains that are very costly.”

Industry leaders such as Ekso Bionics and Cyberdyne are actively producing exoskeletons that have a broad range of applications. Robotic suits could dramatically reduce injury risk for workers with physically intensive jobs, potentially enhancing productivity at the same time.

“Wearable technology has the potential for ameliorating some [health and safety] concerns,” said Littler Mendelson’s Mathiason. “You can see it someday becoming as common as safety shoes.”

Mathiason said this may eventually be of equal importance as applied to Americans with Disabilities Act accommodation issues.

“You have people who couldn’t perform the essential functions of the job. Then seven million paraplegics can suddenly walk and do things nobody thought they would ever do again,” he said.

For workers who’ve already suffered temporary or permanent disabling injuries, exoskeletons could eventually open the doors for new means to keep injured workers on the job. Even severely disabled employees could potentially be returned to productive and essential work, increasing quality of life for injured workers while saving employers millions in partial and total disability payments.

“You have people who couldn’t perform the essential functions of the job. Then seven million paraplegics can suddenly walk and do things nobody thought they would ever do again.” — Garry Mathiason, co-chair of the Robotics, Artificial Intelligence and Automation practice group, Littler Mendelson

Currently, 330 of Cyberdyne’s HAL-5 full-body exoskeletons have been leased to hospitals across Japan, where they assist patients with muscle weakness or disabilities due to stroke and spinal cord injuries. In some industries, this area of robotics could virtually eliminate obstacles to accommodating injured or disabled workers.

Due Diligence

As companies make critical decisions about incorporating robotics into their operations, it’s important to bring risk management into the loop early on.

While companies increasingly transition processes to robotics for the sake of cost savings, said Haaser, “the challenge for the risk manager will be to see that some of those savings are being reinvested back into risk management.”

Advertisement




But the most urgent piece is getting risk management involved in decisions about capital expenditures like robotics from the get-go.

John Abbott, an account executive at Arthur J. Gallagher & Co., said there are a host of questions that risk managers need to think through in advance.

“Are you going to be using it to do something that’s never been done before? Do you want to go into an area where there’s a potential environmental issue that may impair the robot’s performance? Robots are mechanical and electrical systems — any robotic system is prone to wear and tear and failure to some degree.”

Wu of the Silicon Valley Law Group added that due diligence is of utmost importance when selecting vendors for robotic system components, including whether there are any kinds of certifications that apply to the machines.

“Is there a UL-type seal of approval that we could look for that can be had?” Wu asked. “And what kind of testing went into the robots in the first place?”

Issues such as hackers and the potential for fraud must also be given consideration, said Fraker. “For every great capability that’s ever been developed … there’s an opposing potential dark side,” he cautioned.

10152014_01_cover_story_sidebar

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at mkerr@lrp.com

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.”

Advertisement




“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.

Advertisement




“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?

Advertisement




“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.