Risk Insider: Andy Hosman

How Wearables Are Transforming Workplace Safety

By: | August 2, 2017 • 3 min read
Andy Hosman is the vice president of Operational Risk Solutions at Sphera. He has more than 17 years of experience in designing, developing, and implementing risk management solutions to help customers assess, mitigate, manage and monitor their risk more effectively. Prior to joining Sphera, Andy was a senior vice president of product management at Marsh ClearSight.

There are an eye-opening 2.5 quintillion bytes of data created every day, according to a recent IBM-Cisco Systems graphic. Utility companies alone generate five terabytes of data per day. Any way you slice it, this is a powerful amount of data.

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Beyond those staggering numbers, this is what really stands out: “Most of this data is never captured, never analyzed and never taken action on.”

It’s a lot of wasted data for sure, but it doesn’t even include the figures that, until recently, have been mostly untapped: workplace safety data from wearables.

Wearables have definitely caught on in the consumer marketplace as a great way to monitor heart rate, steps taken, flights climbed and many other health-related variables. In the workplace, however — outside of wellness-related applications — wearables are just starting to make their presence felt.

While safety-related wearables are a relatively new concept, they are already paying quantifiable dividends.

That’s about to change in a big way. With wearables, companies will be able to tap into new sources of data that will lead to innovations in workplace safety. Wearables have the potential to bring companies safety-related data that was once considered unattainable. But with this amount of data comes real challenges, such as the potential for data paralysis. Companies will need to find a way to cut through the data in sensible ways that give them the information they need to help keep their workers safe on the job and insights into problems across their safety-reporting culture.

There are already companies that offer wearables to monitor drowsiness, provide GPS-like capabilities and give workers the ability to access the information they need to do their jobs safely, and potentially even offer them a second set of eyes as another worker monitors the situation from a remote location. The technology also allows workers to record events and observations to help companies compile the data they need for true predictive safety analytics.

While safety-related wearables are a relatively new concept, they are already paying quantifiable dividends. For example, as Andrew Ronchi wrote in a recent Construction Executive blog, one U.K.-based company had its bricklayers use wearables for safety- and health-related purposes. With the technology, the workers reduced by 85 percent the time their backs were bent more than 20 degrees and their lower-back muscle activation by 84 percent, according to the post.

The challenge for companies will be getting workers to buy into using wearables in the workplace to collect the necessary data for predictive analytics. Getting buy-in will depend on the type of company and its culture. With wearables, some people will be eager to get access to the latest technology, while others will fear “Big Brother” will be watching them.

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What will get those people who are late to adopt the technology is if they see value. Over time, the safety metrics will speak for themselves. Additionally, similar to how companies have enticed employees to use wearables for wellness programs in exchange for a reduction in insurance premiums, organizations could employ a similar strategy initially for safety wearables.

Lastly, it is important to make wearables optional. Should workers not feel comfortable wearing the device, it makes sense to give those people the choice to opt out.

Ultimately, the data and benefits will speak for themselves. It’s for their safety, after all!

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Business Interruption Risk

Hidden Risks of Violence

The Las Vegas shooting and other tragedies increase demand for non-physical damage BI coverages. The market is growing, but do new products meet companies’ new needs?
By: | December 14, 2017 • 5 min read

Mass shootings in the United States and the emergence of new forms of terrorism in Europe are boosting demand for insurance against losses caused by business interruption when a policyholder suffers no direct property damage, according to insurers.

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But brokers say coverage for non-physical damage BI (NDBI), needs to evolve to better meet the emerging needs of corporate clients.

For years, manufacturing clients sought a more comprehensive range of NDBI coverages, especially due to the indirect effects of natural catastrophes such as the Thai floods that disrupted global supply chains in 2011.

More recently, however, hospitality and entertainment companies are expressing interest as they strive to adapt to realities such as the mass shootings in tourism hotspots Las Vegas and Orlando and terror attacks in such popular destinations as New York, Paris, Berlin, Barcelona and London.

In addition to loss of life and property, revenue loss is a real risk. Tragedies that cause a high number of fatalities can cause severe financial losses, especially for companies relying on tourism, as visitors shy away from crime scenes.

Precedents already exist. Paris received 1.5 million fewer visitors than expected in 2016, after the French capital was targeted by a series of deadly terror attacks the year before.

More recently, bookings declined in the immediate aftermath of a shooting at the Mandalay Bay Resort and Casino in Las Vegas that took the lives of 58 people on October 1: Bookings at the hotel have since recovered.

Joey Sylvester, national director of operations & planning, Public Sector, Gallagher

“The recent horrific mass shootings in Las Vegas, Nev., and in Sutherland Springs, Texas, raised awareness and concerns about similar events occurring in areas where the public congregates, such as entertainment venues like sporting events, concerts, restaurants, movie theaters, convention centers and more,” said Bob Nusslein, head of Innovative Risk Solutions Americas, Swiss Re CS.

“The second highest NDBI cover to natural catastrophes is terrorism, including active shooter and mass shootings.”

However, products available in the market do not always provide the protection companies would like. Active shooter coverages, for example, focus mostly on third-party liabilities that policyholders may face after a shooting.

Loss-of-attraction policies often define triggering events with a high degree of detail. These events may need to be characterized as a terrorist attack or act of war by authorities. In some cases, access to the venue needs to be officially cut off by police.

It follows that an attack by a 64-year old ex-accountant who shoots hundreds of people for no apparent reason — as was the case in the Mandalay Bay tragedy — isn’t likely to align with a typical policy trigger.

But insurers say they are trying to adapt to the evolving realities of both mass shootings and terrorism to meet the new needs expressed by clients.

“The active shooting coverage is drawing much interest in the U.S. market right now. In Europe, clients are increasingly inquiring about loss of attraction,” said Chris Parker, head of terrorism and political violence, Beazley.

“What we are doing at the moment is to try and cross these two kinds of products, so that a client can get coverage for the loss of attraction resulting from an active shooting event.”

Loss-of-attraction policies cover revenue loss derived from catastrophic events, and underwriters already offer alternatives that provide coverage, even when no property damage is involved.

To establish the reach of such a policy, buyers can define a trigger radius — a physical area defined in the policy. If a catastrophic event takes place within this radius, coverage will be triggered. This practice is sometimes called “cat in a box.”

Some products specify locations that, if hit by a catastrophic event, will result in lost revenue for the insured. For resorts or large entertainment complexes, for example, attacks on nearby airports could cause significant loss of revenue and could be covered by NDBI insurance.

Measuring losses is a challenge, and underwriters may demand steep retention levels. According to Parker, excess coverage may kick in after a 20 percent to 25 percent revenue drop.

Insurers will also want proof that the drop is related to the catastrophic event rather than economic downturn, seasonal variances or other factors.

“Capacity is very large for direct acts of terrorism but lower for indirect terrorism and violent acts because the exposure is far greater,” said Joey Sylvester, national director of operations & planning, Public Sector, Gallagher.

“Commercial businesses, public entities, religious and nonprofit organizations have various needs for this type of coverage, and the appetite is certainly trending upward.”

It is difficult to foresee which events will cause business disruption. As a result, according to Nusslein, companies generally prefer to purchase all-risk NDBI covers rather than named-perils coverage.

“The main reason is that, if they have coverage for four potential NDBI events and a fifth event occurs, the fifth event is not covered,” he said. “Insurers, new to NDBI covers, still prefer named-perils covers over all-risk cover.”

Current geopolitical tensions are also fueling buyers’ demands.

“Many companies want nuclear, biochemical, chemical and radiological exclusions removed from terrorism NDBI covers. While this is more difficult for insurers, it is not impossible,” Nusslein said.

“War risk NDBI cover is becoming more sought after due to political tensions between the U.S. and North Korea.”

“Many companies want nuclear, biochemical, chemical and radiological exclusions removed from terrorism NDBI covers. While this is more difficult for insurers, it is not impossible.” — Bob Nusslein, head of Innovative Risk Solutions Americas, Swiss Re CS

Natural catastrophes still constitute the largest share of perils underlying NDBI products.  Parametric indexes are increasingly employed to provide uncontroversial triggers to policies, said Duncan Ellis, U.S. property practice leader, Marsh.

These indexes range from rainfall levels and wind speed to the measured intensity of earthquakes. Interest in this kind of NDBI coverage expanded after the recent hurricane season.

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“The benefit of these products is that you do not have to go through the settlement process, which clients hate,” Ellis said.

NDBI policies are often bespoke, which is more common for very large insurance buyers.

“Usually, the market offers bespoke coverages for individual industries or clients, with very significant deductibles,” said Tim Cracknell, partner,  JLT Specialty.

NDBI cover can also help transfer regulatory and product recall risks. The life science sector is expressing interest in this kind of solution for cases where a supplier goes bankrupt or is shut down by a regulator, or a medication needs to be recalled due to perceived flaws in the manufacturing process.

Experts say that concerns still to be addressed are NDBI losses caused by cyber attacks and pandemics.

Capacity is an ongoing concern. According to Swiss Re CS, $50 million to $100 million, or even more, can be achieved through foundation capacity provided by a lead insurer, with syndicated capacity to other insurers and reinsurers, depending on the risk. &

Rodrigo Amaral is a freelance writer specializing in Latin American and European risk management and insurance markets. He can be reached at [email protected]