Videos and voice recordings manipulated with previously unheard-of sophistication – known as “deepfakes“ – have proliferated and pose a growing threat to individuals, businesses, and national security, as Triple-I warned back in 2018.
Deepfake creators use machine-learning technology to manipulate existing images or recordings to make people appear to do and say things they never did. Deepfakes have the potential to disrupt elections and threaten foreign relations. Already, a suspected deepfake may have influenced an attempted coup in Gabon and a failed effort to discredit Malaysia’s economic affairs minister, according to Brookings Institution.
Most deepfakes today are used to degrade, harass, and intimidate women. A recent study determined that up to 95 percent of the thousands of deepfakes on the internet were pornographic and up to 90 percent of those involved nonconsensual use of women’s images.
Businesses also can be harmed by deepfakes. In 2019, an executive at a U.K. energy company was tricked into transferring $243,000 to a secret account by what sounded like his boss’s voice on the phone but was later suspected to be thieves armed with deepfake software.
“The software was able to imitate the voice, and not only the voice: the tonality, the punctuation, the German accent,” said a spokesperson for Euler Hermes SA, the unnamed energy company’s insurer. Security firm Symantec said it is aware of several similar cases of CEO voice spoofing, which cost the victims millions of dollars.
A plausible – but still hypothetical – scenario involves manipulating video of executives to embarrass them or misrepresent market-moving news.
Insurance coverage still a question
Cyber insurance or crime insurance might provide some coverage for damage due to deepfakes, but it depends on whether and how those policies are triggered, according to Insurance Business. While cyber insurance policies might include coverage for financial loss from reputational harm due to a breach, most policies require network penetration or a cyberattack before it will pay a claim. Such a breach isn’t typically present in a deepfake.
The theft of funds by using deepfakes to impersonate a company executive (what happened to the U.K. energy company) would likely be covered by a crime insurance policy.
Little legal recourse
Victims of deepfakes currently have little legal recourse. Kevin Carroll, security expert and Partner in Wiggin and Dana, a Washington D.C. law firm, said in an email: “The key to quickly proving that an image or especially an audio or video clip is a deepfake is having access to supercomputer time. So, you could try to legally prohibit deepfakes, but it would be very hard for an ordinary private litigant (as opposed to the U.S. government) to promptly pursue a successful court action against the maker of a deepfake, unless they could afford to rent that kind of computer horsepower and obtain expert witness testimony.”
An exception might be wealthy celebrities, Carroll said, but they could use existing defamation and intellectual property laws to combat, for example, deepfake pornography that uses their images commercially without the subject’s authorization.
A law banning deepfakes outright would run into First Amendment issues, Carroll said, because not all of them are created for nefarious purposes. Political parodies created by using deepfakes, for example, are First Amendment-protected speech.
It will be hard for private companies to protect themselves from the most sophisticated deepfakes, Carroll said, because “the really good ones will likely be generated by adversary state actors, who are difficult (although not impossible) to sue and recover from.”
Existing defamation and intellectual property laws are probably the best remedies, Carroll said.
Potential for insurance fraud
Insurers need to become better prepared to prevent and mitigate fraud that deepfakes are capable of aiding, as the industry relies heavily on customers submitting photos and video in self-service claims. Only 39 percent of insurers said they are either taking or planning steps to mitigate the risk of deepfakes, according to a survey by Attestiv.
Business owners and risk managers are advised to read and understand their policies and meet with their insurer, agent or broker to review the terms of their coverage.
By Marielle Rodriguez,Social Media and Brand Design Coordinator, Triple-I
Sunil Rawat
Triple-I’s “Insurance Careers Corner” series was created to highlight trailblazers in insurance and to spread awareness of the career opportunities within the industry.
This month we interviewed Sunil Rawat, Co-Founder and CEO of Omniscience, a Silicon Valley-based AI startup that specializes in Computational Insurance. Omniscience uses five “mega-services” that comprise of underwriting automation, customer intelligence, claims optimization, risk optimization, and actuarial guidance to help insurance companies improve their decision-making and achieve greater success.
We spoke with Rawat to discuss his technical background, the role of Omniscience technology in measuring and assessing risk, and the potential flaws in underwriting automation.
Tell me about your interest in building your business. What led you to your current position and what inspired you to found your company?
I’m from the technology industry. I worked for Hewlett Packard for about 11 years, and hp.com grew about 100,000% during my tenure there. Then I helped Nokia build out what is now known as Here Maps, which in turn powers, Bing Maps, Yahoo Maps, Garmin, Mercedes, Land Rover, Amazon, and other mapping systems.
I met my co-founder, Manu Shukla, several years ago. He’s more of the mad scientist, applied mathematician. He wrote the predictive caching engine in the Oracle database, the user profiling system for AOL, and the recommender system for Comcast. For Deloitte Financial Advisory Services, he wrote the text mining system used in the Lehman Brothers probe, the Deepwater Horizon probe and in the recent Volkswagen emissions scandal. He’s the ‘distributed algorithms guy’, and I’m the ‘distributed systems guy’. We’re both deeply technical and we’ve got this ability to do compute at a very high scale.
We see an increasing complexity in the world, whether it’s demographic, social, ecological, political, technological, or geopolitical. Decision-making has become much more complex. Where human lives are at stake, or where large amounts of money are at stake on each individual decision, each individual decision’s accuracy must be extremely high. That’s where we can leverage our compute, taken from our learnings over the last 20 years, and bring it to the insurance domain. That’s why we founded the company — to solve these complex risk management problems. We’re really focused on computational finance, and more specifically, computational insurance.
What is Omniscience’s overall mission?
It’s to become the company that leaders go to when they want to solve complex problems. It’s about empowering leaders in financial services to improve risk selection through hyperscale computation.
What are your main products and services and what role does Omniscience technology play?
One of our core products is underwriting automation. We like to solve intractable problems. When we look at underwriting, we think about facultative underwriting for life insurance where you need human underwriters. The decision-making heuristic is so complex. Consider somebody who’s a 25-year-old nonsmoker asking for a 10-year term policy of $50,000 — it’s kind of a no-brainer and you can give them that policy. On the other hand, if they were asking for $50 million, you’re certainly going to ask for a blood test, a psychological exam, a keratin hair test, and everything in between. You need humans to make these decisions. We managed to take that problem and use our technology to digitize it. If you take a few hundred data fields, and a few 100,000 cases to build an AI model, it quickly becomes completely intractable from a compute standpoint. That’s where we can use our technology to look at all the data in all its facets — we automate and use all of it.
Once you’ve got an AI underwriter’s brain in software, you think from the customer intelligence standpoint. You’ve got all this rich transaction data from your customers to pre-underwrite, qualify, and recommend them for different products. We’ve also built a great capability in the data acquisition area. For workers comp and general liability, we have the data that improves the agent experience. We can also correctly classify any NAICS codes and can help with claims avoidance and finding hidden risk. We’ve also got a great OCR capability. In terms of digitization of text, we can take complex tabular data and digitize it without any human in the loop. We’re able to do this worldwide, even in complex Asian languages. We also do a lot of work in asset and liability management and can do calculations that historically have been done in a very low-powered, inaccurate manner. We can run these calculations daily or weekly, vs annually, which makes a big difference for insurance companies.
We also work in wildfire risk. A lot of wildfire spread models look at a ZIP+4 or a zip code level, and they take about four hours to predict one hour of wildfire spread, so about 96 hours to predict one day of wildfire spread at a zip code level. In California, where I am, we had lots of wildfires last year. When you double the density of the grid, the computation goes up 8x. What we were able to do is improve and look at the grid at 30 meters square, almost at an individual property size. You can individually look at the risk of the houses. At a 30-meter level, we can do one hour of wildfire propagation in 10 seconds, basically one day in about four minutes.
Are there any potential flaws in relying too much on automation technology that omits the human element?
Absolutely. The problem with AI systems is they may generally be only as good as the data that they’re built on. The number one thing is that because we can look at all the data and all its facets, we can get to 90+ percent accuracy on each individual decision. You also need explainability. It’s not like an underwriter decides in a snap and then justifies the decision. What you need from a regulatory or an auditability standpoint is that you must document a decision as you go through the decision-making process.
If you’re building a model off historical data, how do you make sure that certain groups don’t get biased again? You need bias testing. Explainability, transparency, scalability, adjustability — these are all very important. From a change management, risk management standpoint, you have the AI make the decision, and then you’ll have a human review. After you’ve done that process for some months, you can introduce this in a very risk-managed way. Every AI should also state its confidence in its decision. It’s very easy to decide, but you also must be able to state your confidence number and humans must always pay attention to that confidence number.
What is traditional insurance lacking in terms of technology and innovation? How is your technology transforming insurance?
Insurers know their domain better than any insurtech can ever know their domain. In some ways, insurance is the original data science. Insurers are very brilliant people, but they don’t have experience with software engineering and scale computing. The first instinct is to look at open-source tools or buy some tools from vendors to build their own models. That doesn’t work because the methods are so different. It’s kind of like saying, “I’m not going to buy Microsoft Windows, I’m going to write my own Microsoft Windows”, but that’s not their core business. They should use their Microsoft Windows to run Excel to build actuarial models, but you wouldn’t try to write your own programs.
We are good at system programming and scale computing because we’re from a tech background. I wouldn’t be so arrogant to think that we know as much about insurance as any insurance company, but it’s through that marriage of domain expertise in insurance and domain expertise in compute that leaders in the field can leapfrog their competitors.
Are there any current projects you’re currently working on and any trends you see in big data that you’re excited about?
Underwriting and digitization, cat management, and wildfire risk is exciting, and some work that we’re doing in ALM calculations. When regulators are asking you to show that you have enough assets to meet your liabilities for the next 60 years on a nested quarterly basis, that becomes very complex. That’s where our whole mega-services come in — if you can tie all together your underwriting, claims, and capital management, then you can become much better at selection, and you can decide how much risk you want to take in a very dynamic way, as opposed to a very static way.
The other things we’re excited about is asset management. We are doing some interesting work with a very large insurer. What we’ve been able to do is boost returns through various strategies. That’s another area we’re excited about — growing quite rapidly in the next year.
What your goals are for 2021 and beyond?
It’s about helping insurers develop this multi-decade compounding advantage through better selection, and we’re just going to continue to execute. We’ve got a lot of IP and technology developed, and we’ve got pilot customers in various geographies that have used our technology. We’ve got the proof points and the case studies, and now we’re just doubling down on growing our business, whether it’s with the same customers we have or going into more product lines. We are focused on serving those customers and signing on a few more customers in the three areas where we are active, which is Japan, Hong Kong, China, and North America. We are focused on methodically executing on our plan.
With the cyber risk environment worsening significantly, a recent A.M. Best report says, “prospects for the U.S. cyber insurance market are grim.”
The recent proliferation of ransomware attacks leading to business interruption and other related hazards has caused cyber insurance – which began as a diversifying, secondary line – to become a primary component of a corporation’s risk management and insurance purchasing decisions.
Consequently, the A.M. Best report says, insurers urgently need to reassess all aspects of cyber risk, including their appetite, risk controls, modeling, stress testing, and pricing, to remain a viable long-term partner for dealing with cyber risk.
Cyber insurance “take-up” rates (the percentage of eligible customers opting to buy the coverage) are on the rise, according to a recent Government Accountability Office (GAO) report – to 47 percent in 2020 from 26 percent in 2016. This increased demand has been accompanied by higher prices for cyber insurance, as well as reduced coverage limits for some industry sectors, such as healthcare and education. In a recent survey of insurance brokers, the GAO says, more than half of respondents’ clients saw prices rise 10 to 30 percent in late 2020.
“The rate increases for cyber insurance outpaced that of the broader property/casualty industry, but the increase in cyber losses outstripped the rate hikes, which suggests more trouble for 2021 as ransom demands continue to grow,” said Sridhar Manyem, director, industry research and analytics at A.M. Best.
The A.M. Best report says the challenges the cyber insurance market faces include:
Rapid growth in exposure without adequate underwriting controls;
The growing sophistication of cyber criminals that have exploited malware and cyber vulnerabilities faster than companies that may have been late in protecting themselves; and
The far-reaching implications of the cascading effects of cyber risks and the lack of geographic or commercial boundaries.
In April, Federal Reserve Chairman Jerome Powell said cyberattacks are the foremost risk to the global financial system, even more so than the lending and liquidity risks that led to the 2008 financial crisis.
“The world evolves, and the risks change as well and I would say that the risk that we keep our eyes on the most now is cyber risk,” Powell said. “There are scenarios in which a large financial institution would lose the ability to track the payments that it’s making, where you would have a part of the financial system come to a halt, and so we spend so much time, energy and money guarding against these things.”
More recently, FBI Director Christopher Wray compared compared the current spate of cyberattacks with the challenge posed by the Sept. 11, 2001, terrorist attacks. He said the agency was investigating about 100 different types of ransomware, many tracing back to hackers in Russia.
As we’ve written elsewhere with respect to natural catastrophes, it seems the world has entered a phase in which the traditional emphasis on risk transfer through insurance products is no longer sufficient to address today’s complex, interconnected perils. A focus on resilience and pre-emptive mitigation is in order, and insurers are well positioned to serve not only as financial first responders but as partners in managing these evolving hazards.
Ms. Winnie Tsen, Assistant Director, Financial Markets and Community Investment, U.S. Government Accountability Office (GAO), was one of the key contributors to the GAO’s May 2021 report on cyber insurance.
By Marielle Rodriguez, Social Media and Brand Design Coordinator
Janthana Kaenprakhamroy
Triple-I’s “Insurance Careers Corner” series was created to highlight trailblazers in insurance and to spread awareness of the career opportunities within the industry.
May is Asian American and Pacific Islander Heritage Month, and this month we interviewed Janthana Kaenprakhamroy, CEO of London-based insurtech, Tapoly. Although Janthana lives in the UK, we believe that Asian heritage should be celebrated no matter where you live.
Founded in 2016, and backed by Lloyd’s of London, Tapoly is Europe’s first and fastest growing insurtech, providing on-demand flexible commercial insurance products for SMEs, freelancers, the self-employed and the gig economy. Recognized as Insurance Provider of the Year at the British Small Business Awards in 2018, Tapoly’s mission is to make insurance simple, accessible, and flexible.
We spoke with Kaenprakhamroy to discuss the role of AI and technology in her business, the boom of the sharing economy, and what the traditional insurance industry can learn from insurtech.
Tell us about your background and your interest in building a business. What led you to your current position and what inspired you to found your company, Tapoly?
I was born in and come from a small part of Thailand, grew up in Sweden, and have lived in London for the last 20 years. I have roots in different parts of the world, which has shaped my international way of thinking. I feel like I don’t fit a specific stereotype and can blend into different cultures.
I’m an accountant by trade and have worked in investment banking for almost my entire career. In late 2016, I decided to quit my job and build Tapoly. We provide technology solutions and insurance products locally in the UK as well as in Asia.
I was never sure what I wanted to do until I came across a problem in 2016 when I was trying to buy insurance for my short letting over the summer, which you can only do for about 90 days a year. In 2016, no insurance companies were serving the types of products for the short letting space. Ever since then, we’ve been developing technology solutions and products to cover this massively underserved market within the micro, SME, and freelancing space.
What is your organization’s mission? What role does tech and AI play in your platform?
Our mission is very simple – we want to able to provide an insurance solution online that is quick and easy for people, in the most convenient way, which is one thing in the commercial lines space that’s not very well-developed. Most companies are buying insurance through their brokers, rather than online directly. We wanted to make commercial lines products easier and less time-consuming for customers to access, without making them answer several questions that they may or may not know how to answer.
If you offer insurance online directly, then the underwriting decision must be prompt and that can only be achieved when you have data on your customers. There is data that traditional insurance companies aren’t using, for example, social media data, which can be cross-referenced with [the customer’s] profile. It’s all about augmenting data to amplify or make customers profiles more prominent for underwriting decisions – it’s something insurtech is doing well. Insurtech would allow data to flow from the point of the customer buying insurance to the point of the underwriter making the decision – this makes the process more seamless and transparent.
A lot of what we do at Tapoly is data analytics. It’s not only for risk selection and underwriting alone – it’s also for customer acquisition and marketing. Customer segmentation is very important, and you can only do it with a certain level of good-quality data on your customers.
What do you see as the biggest pain points for customers within traditional insurance that insurtech can better solve?
Customers in the market segment that we serve, which is microbusinesses and freelancers, have three main pain points. One is the price, especially for customers who do ad-hoc jobs which are not part of their core competency or core activity. Second is the convenience – the ability to fill in a simple questionnaire and get insurance quickly. Third is the availability – some products are not available for some freelancers. For example, a group of freelancers doing construction work in a certain environment are less likely to get certain insurance products due to their high risk profile.
Within the gig economy, there are job titles that are outside the norm and that don’t fall inside traditional insurance categories. We need to revamp the list of professions. In insurtech, we see gaps in coverage [in certain industries]. For example, marketplaces where the underlying risks may be different depending on what level of services and products the platform is providing. Another example may be the evolution of some professions, e.g. “virtual assistants”, where they may in some cases provide basic accounting services, which would previously be performed by certified professionals, because accounting is also moving online. There’s a lot of mismatch between the way insurers categorize their customers and the profession that customers recognize themselves as, and the ability to buy insurance automatically in the most convenient way.
Do you see innovation and transformation happening in the traditional insurance space?
I think the insurance industry is well-aware of the need for innovation and many companies are at the beginning of innovating, but innovation takes time. While we recognize the need, it will take time to implement. As a startup, we don’t have a hierarchical structure or have as many constraints. We can build anything we want without waiting for the approval of senior management. What insurtech can bring is the speed to market, the ability to adapt, and to implement changes and help insurers prove the concept in the most cost-effective way.
In what ways has COVID-19 impacted the sharing economy and your business? What are your predictions for the growth and trajectory of the sharing economy?
A 2015 PWC report showed that revenue from the sharing economy was $15 billion in 2013 and would reach $335 billion in 2025. That’s a phenomenal increase in the market within 12 years. I think the COVID-19 pandemic really accelerated the sharing economy. There are so many businesses that did fantastically well during the pandemic, including businesses in logistics and delivery, and the insurtechs that are operating in that space. From the product delivery, customer-facing side, we didn’t have a problem because we were already set up to operate online. However, it did impact our customers and some of them didn’t renew their insurance or either postponed or changed their policy.
In terms of opportunities, there are many insurance companies or intermediaries that have started to think about innovation. COVID-19 has really accelerated that thinking because tech has become a big hurdle. There are a lot of operational challenges among larger insurance companies that are not set up to sell insurance digitally. That is something insurtech can take advantage of because we are already set up to do this.
Let’s talk about diversity in VC funding and entrepreneurship. A2019 Diversity VC report showed that ethnic minorities are under-represented in venture capital and women are under-represented in senior roles. Another2020 Extend Ventures report shows that female entrepreneurs receive just a fraction of available funding that male founders do. Were there any initial challenges in founding your company and attaining funding, and how did you overcome these obstacles? Are there any present challenges of being an Asian- and woman-owned business and founder?
In the beginning, not raising enough funding can cause a slowdown in your growth. Even with the best ideas, it’s hard to scale your business without capital. I certainly think that the confidence in a woman in running a business could be improved in the VC space. There are a lot of stereotypes and unconscious biases that people apply to their decisions. The VC space needs to work on being self-aware and educate themselves around these issues especially when judging a first-time entrepreneur. There is also uncertainty and a lack of data on startups that make it difficult for VCs to validate and invest in, on top of gender stereotypes.
My biggest daily challenge is finding enough capital to be able to grow my business. The difficulty for early-stage founders is balancing your own interests with the investor’s interests and figuring out how much you want to raise versus how much you can raise. To overcome this problem, we usually find strategic investors that can add a lot of value.
What are your goals for 2021 and beyond? Where do you see the traditional industry heading in the next few years given the pandemic?
We’re preparing for hockey stick growth in 2021 and want to exponentially grow our company in 2022. My aim is to raise enough money to be a larger team and to have the capacity to manage that level of volume and growth.
I think the traditional insurance industry will evolve slowly in the next couple of years. A lot of insurers have been badly hit due to COVID-19 because of claim costs and loss of investments. It would take a couple of years before we recover fully, and hopefully insurtech will still be relevant within this space. At least if anything, insurance companies will be spending more on innovation to reduce their claims and operating costs.
The insurance industry continues to be a major stakeholder in mitigating the effects of natural disasters on communities. As such, a group of U.S. insurers, reinsurers, intermediaries, and model providers are creating an advisory board called Helix.
Facilitated by The Institutes, Helix seeks to integrate new approaches to automated claims analysis into an overarching framework for the application of new and emerging technologies in natural disaster resilience, according to a Risk & Insurance article.
“We are excited to help coordinate this effort focused on mitigating the adverse effects of natural disasters,” says Peter Miller, President and CEO of The Institutes. He described Helix as an opportunity “to serve as a neutral third party in work on this important issue that ultimately benefits the general public.”
Initially building on work to implement open common data standards for catastrophe risk analytics, the Helix vision is grounded on four pillars to support the industry’s increasingly wide-ranging and growing capabilities:
Climate and resilience: Pursuing hazard and resilience research and advocating for innovation in insurance products and economic responsiveness;
Data standards, data content/interpretation/quality, and industry-level data resources;
Technology: Transparency in models and analytics, Insurtech innovations, and technology solutions;
Operations: Common industry tools, improved communication/exchange across the value chain, and support/education for the industry
Helix builds on the work of The Institutes’ Catastrophe Modeling Operating Standards (CMOS) initiative. The CMOS team completed a survey project in September 2020 to establish and implement an open common exposure data standard. This project also provided a set of recommendations for the community to advance the work.
“Based on the interest in and success of the CMOS, it is clear there is a desire for an industry-wide, cooperative effort focused on resilience from natural catastrophes,” says Sean Ringsted, Chief Risk Officer, Chubb. “We’ve received strong interest in creation of Helix and look forward to welcoming the participation of additional organizations.”
The Institutes is in the process of engaging founding members and building out the appropriate governance structure. As those are put in place, Helix members will determine initial priorities in support of the four pillars and leveraging the work performed under the CMOS initiative. Companies in search of additional information, or that have interest in contributing expertise to the effort can contact The Institutes at helix@theinstitutes.org.
By Marielle Rodriguez, Social Media and Brand Design Coordinator, Triple-I
Kevin Henderson
For Black History Month, Triple-I is putting the spotlight on Black entrepreneurs and innovative leaders in insurance. We sat down with Kevin Henderson, Founder and CEO of Indenseo, an analytics software company based in Palo Alto, CA to talk about his background in insurtech and how telematics is shaping the commercial auto insurance space.
Originally from West Medford, Massachusetts, Henderson moved to the Bay Area in California during the Web 1.0 internet boom in the late-1990’s, where he led the global data business for telematics company @Road [later acquired by Trimble] and partnered with commercial auto carriers on their telematics programs. Henderson’s extensive experience in insurance telematics led him to create Indenseo in 2013.
Data has an enormous potential for insurance, according to Henderson. We are now able to know in real-time what’s happening with the vehicle and how it’s being driven. Combining telematics data with contextual data like the road conditions, the limit is your imagination.
Yet, obtaining funding for Indenseo as a Black business owner provided initial hurdles for Henderson. Citing a Harvard Business article on diversity in innovation, he says there’s a positive correlation between the [racial] makeup of partners and those who get funded.” However, his difficulties with obtaining VC funding also led him to be more strategic in his fundraising approach. “It made [us] use the capital we did raise more efficiently,” he says.
While funding was an initial battle, Henderson shares the importance of having a vision and people around you that you trust.
“You need to have people around you that know the ecosystem, and people who will be honest with you. It’s a numbers game and you need to be creative. Learn how to target investors with an interest in the markets you’re trying to get into,” he says.
While telematics is synonymous with commercial fleets, use in personal lines insurance remains low. COVID-19 has revealed telematics’ potential in personal lines. “People are more open with sharing their data,” Henderson says. “The shift in driver behavior caused by the pandemic has revealed that people want to be priced based on how much they use their vehicles as opposed to a standard premium that doesn’t account for vehicle use.”
The COVID-19 pandemic has also brought its own set of challenges for Indenseo, including a slowdown in developing international business, but Henderson believes those opportunities will help expand his business in other countries. “Not everything can be done on Zoom. I will be back on airplanes when international travel and in-person meetings are practical again.”
As on the future of telematics in insurance, Henderson believes that commercial auto will evolve very differently than personal lines.
“The risks are different, and the technology is different. The risk you care about for an 18-wheel truck or a service van will be much different than the risk for a four-wheel sedan,” he says.
With the rise of new specialty markets and new companies, distribution models will change, and new products will emerge. All this makes the future of telematics and commercial auto insurance quite unpredictable and exciting.
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Indenseo will be hosting a free webinar with Jeffrey Williams of Forrester on February 25th, 1PM ET as part of the “Connected Insurance” series on how IoT will transform insurance. During the webinar, they will talk about trends, technologies, and use cases.
Drivers seem to have become more comfortable in the past year with the idea of giving up their data to help insurers more accurately price their coverage.
In May 2019, mobility data and analytics firm Arity surveyed 875 licensed drivers over the age of 18 to find out how comfortable they would be having their insurance premiums adjusted based on typical telematics variables. Between 30 and 40 percent said they would be either very or extremely comfortable sharing this data.
In May of this year, they ran the survey again with more than 1,000 licensed drivers.
“This time,” Arity says, “about 50 percent of drivers were comfortable with having their insurance priced based on the number of miles they drive, where they drive, and what time of day they drive, as well as distracted driving and speeding.”
This is a year-over-year increase of more than 12%. What happened?
The answer begins with a “C” and ends with a “19.”
Money talks…
Telematic information was part of the reason insurers could return money quickly to their customers during the COVID-19 pandemic, and that fact seems to have brought positive attention to usage-based insurance (UBI). Telematics combines GPS with on-board diagnostics to record and map where a car is, its condition, and how fast it’s traveling. This technology is integral to UBI, in which insurers are able to adjust premiums based on driving behavior.
During the first wave of the pandemic, Arity data showed considerable changes in how and when people were driving when they began to self-quarantine in March 2020. Driving across the U.S. dropped significantly, and this data helped spark the trend of insurance carriers offering refunds to their policyholders.
“These paybacks were widely covered by the media, including Forbes, so consumers became aware of the potential savings, even if their own insurer didn’t offer a discount,” Arity reports.
“Private-passenger auto insurers returned around $14 billion in premiums this year to the nation’s drivers as miles driven dropped dramatically in the pandemic’s early months,” says James Lynch, Triple-I’s chief actuary. “This resulted in a five percent reduction in the cost of auto insurance for the typical driver in 2020, as compared to 2019.”
Recent advisories from two U.S. Treasury agencies – the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) – indicating that companies paying ransom or facilitating such payments to cyber extortionists could be subject to federal penalties are a reminder of the importance of good cyber hygiene.
The notices also underscore businesses’ need to consult with knowledgeable, reputable professionals long before a ransomware attack occurs and before making any payments.
Ransomware on the rise
In a ransomware attack, hackers use software to block access to the victim’s own data and demand payment (usually in Bitcoin or another cryptocurrency) to regain access. It has been a growing problem in recent years, and such attacks have intensified since the COVID-19 pandemic has led to many people working from home for the first time.
The FBI warns against paying ransoms, but studies have shown that business leaders today pay a lot in the hope of getting their data back. An IBM survey of 600 U.S. business leaders found that 70% had paid a ransom to regain access to their business files. Of the companies responding, nearly half have paid more than $10,000, and 20% of them paid more than $40,000.
Sanctioned entities
The OFAC advisory specifically targets transactions benefiting individuals or entities on OFAC’s Specially Designated Nationals and Blocked Persons List, other blocked persons, and those covered by comprehensive country or region embargoes (e.g., Cuba, the Crimea region of Ukraine, Iran, North Korea, and Syria).
“Companies should rely on experts to assist with their due diligence and work with the FBI,” writes law firm BakerHostetler in a recent blog post. “Experience in incident response is key, and your counsel should be an informed, confident partner as you navigate this rapidly evolving area.”
“Before a payment is made,” the law firm writes, “a company generally retains a third party to conduct due diligence to ensure that the payment isn’t being made to a sanctioned organization or a group reasonably suspected of being tied to a sanctioned organization. Additionally, checks are in place to ensure that anti-money laundering laws are not being violated.”
Many insurers are working with their clients to put such practices in place and taking a variety of other steps to address the threat of ransomware attacks. Cyber-insurance premiums started rising 5% to 25% late last year, according to Robert Parisi, U.S. cyber product leader at insurance broker Marsh & McLennan. Parisi called the increases “dramatic” but said insurers have not scaled back coverage.
Marsh has issued a client advisory — What OFAC’s Ransomware Advisory Means for US Companies — explaining what U.S. businesses need to know about the OFAC advisory and the importance of completing an OFAC review before payment of ransom demands. Marsh’s advisory also makes recommendations for re-assessing ransom incident response plans, mitigating ransomware risk, and preparation for and recovery from ransomware and cyber extortion attacks.
Four entrepreneurial teams who have developed products to boost societal resilience and to mitigate natural disaster risks will present them during a free Insurance Information Institute (Triple-I) event on Thursday, Oct. 22, at 11 a.m., ET.
Billed as the Lightning Rounds for Resilience and Pre-Disaster Mitigated Innovations, it is the third time this year the Triple-I and its Resilience Accelerator, ResilientH20 Partners and The Cannon, have connected entrepreneurs with leading insurance innovation specialists and investors. Pre-registration is required.
The first of the day’s two panels will feature the web-based apps developed by the prize-winning teams from 2020’s collegiate Hack-for-Resilience III. The Triple-I and the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania honored these two student entrepreneurial teams in September 2020.
Air.ly: The app identifies locales near wildfire zones where individuals afflicted with respiratory issues, or other health complications, can find fresh air. It won the prize this year for the Best Overall Hack-for-Resilience.
Insura: The app uses a home’s location and historical loss data to recommend mitigation and maintenance activities which could reduce a homeowner’s insurance premiums. It won this year’s prize for the Best Application of Insurtech.
“We’re excited to spotlight the outstanding work of talented students who have accepted the challenge to build and empower the resilience movement. Products like Air.ly and Insura are proof today’s brightest young minds are creating the tools that will better allow people to navigate through, and prepare for, natural disasters,” said Michel Leonard, PhD, CBE, Vice President and Senior Economist, Triple-I.
Two established businesses – members of the Resilience Innovation Hub “portfolio of disaster risk-mitigation innovation” -will present their products and services during the event’s second and final panel:
Thermal Gate™ 2.5: The artificial intelligence (AI) based system screens and detects individuals who have an elevated body temperature before they enter venues which are open to the public.
Mesh++ : The just-in-time WiFi community network requires no external power nor wiring to generate broadband access for first-responders, citizens, and preparedness interests.
On September 24 a virtual discussion hosted by the Department of Homeland Security’s Science and Technology Advisory Committee will inform community leaders about how new science and technology applications are enhancing resilience and protecting lifeline systems and networks.
During the discussion experts will describe how technologies can inform risk-based decision-making in areas of neighborhood health monitoring, supply chains, evacuation planning, crisis communications, and information sharing among frontline responders. Innovation in predictive analytics, modeling and simulation, and mobility offer new solutions to tackle immediate challenges and prepare for emerging threats.
The panel will also cover how new public-private partnerships are accelerating new solutions and business models to prepare for day-to-day emergencies.
The discussion will include Michel Léonard, PhD, CBE, Vice President & Senior Economist, Insurance Information Institute; and Richard Seline, Managing Director, ResilientH20Partners.
David Maurstad, Deputy Associate Administrator, FEMA
Duane Caneva, Chief Medical Officer, DHS Countering WMD Office
Ted Smith, Ph.D., Wastewater Based Epidemiology, Professor of Environmental Medicine, University of Louisville and Advisor to Louisville Mayor, Greg Fischer
Catherine Cross, Deputy Under Secretary, DHS Science and Technology Directorate (S&T)
David Corman, Program Director, Cyber-Physical Systems and Smart and Connected Communities, National Science Foundation
Michel Léonard, Vice President and Senior Economist, Insurance Information Institute
Moderator: David Alexander, Director of Resilience Research and Partnerships, DHS S&T
The Insurance Information Institute’s Resilience Accelerator was created to build awareness and adoption of insurance as a frontline defense against the impact of extreme weather events on households, businesses and communities.
