The Internet of Things: Benefits and Risks

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Ten years ago there were about 500 million devices connected to the Internet. Today, that number has grown to between 10 and 20 billion. By 2020, there will likely be 40 to 50 billion. Many of these will be devices we are familiar with today: laptops, tablets, smartphones. But far more will be physical objects whose main function, without any human intervention, will be to capture data (typically via sensors) and then transmit it elsewhere over the Internet where it can be stored and analyzed to enable better decision-making.

In short, we will have an Internet not just of computers, but of things. Any thing – even a human body, if equipped with the right electronic parts – can become part of IoT, so long as it can collect and transmit data through the Internet.

The Internet of Things (IoT) is in fact already with us, but it has not yet reached a point where everyone feels its impact. That is about to change. Soon every industry, and virtually every company, will be not only affected, but transformed by IoT. In combination with other developments such as cloud computing, smart grids, nanotechnology and robotics, IoT will usher in a period of greater economic efficiency, productivity, safety, and profits. And its impact on the global economy will be enormous. RAND Europe, for example, puts the global annual economic potential of IoT across all business sectors at between $1.4 trillion and $14.4 trillion.

Two advances have put IoT on the cusp of a breakthrough. One is mobile technology – both mobile devices and the widespread availability of wireless connectivity. The second is the rapidly falling price of sensors. In the early 1990s, a solid state sensor cost $20 to $25. By the end of the decade, it was $5. Prices for sensors of all types have continued to fall.

The typical smartphone, for example, has between five and nine sensors that monitor constantly for such things as ambient light and sound, movement, attitude (via gyroscopic sensors), temperature, humidity, etc. Yet the total cost of all these sensors is less than $5. As prices continue to drop, they will be imbedded in more and more objects that will connect to IoT.

What can inexpensive data-collecting sensors connected to the Internet do for us? As it turns out, quite a lot.

IoT benefits – a few examples

A number of industries are already finding that IoT offers improvements in areas safety, efficiency, data-driven decision making and infrastructure.

One obvious example that is much in the news is the development of autonomous (“driverless”) motor vehicles. The World Health Organization has put the annual number of auto-related deaths worldwide at well over one million. The majority of these deaths are due to human error. IoT technology, especially the rise of safety-focused sensors in automobiles, has the potential to dramatically reduce motor-vehicle related accidents and deaths, especially when embedded in autonomous cars and other vehicles.

In manufacturing, IoT is helping keep workers safe through wearable technology equipped with embedded sensors to warn workers of unsafe conditions (e.g. the presence of toxic gasses) or over-exertion. And IoT devices placed strategically throughout even the most complex global supply chain can give managers deep, real-time insight into any problems, even before they arise.

IoT also enables healthcare workers to keep much closer tabs on patients. Paramedics, for example, can use IoT devices to capture critical patient data and transmit it instantly to the ER, so that by the time a patient arrives, the doctors already have a plan of action in place instead of wasting vital time trying to understand the patient’s condition from the ground up.

Such examples can be multiplied almost ad infinitum. But as always, there is no free lunch.

IoT Risks

From what we can see today, the three biggest risks related to the broad use of IoT lie in the areas of privacy, cybersecurity and liability.

Privacy concerns and the Internet date back at least to the advent of tracking software or cookies, and the addition of billions more devices constantly monitoring data, much of it personal, will only aggravate these worries for many people, both in their private lives and at work. Since no single federal law governs the collection and use of personal data, it is likely that laws and regulations will continue to evolve that attempt to strike an acceptable balance between the benefits of IoT and privacy-related concerns.

Cybersecurity is also a risk we are already familiar with and one that is likely to be exacerbated by IoT. Since any node on a network is a potential point of entry for a hacker, overall network security will become an even bigger issue than it is today.

Finally, on the liability front, IoT devices can quickly generate legal and ethical conundrums that no one currently has any idea how to resolve. Just one example: Should a driverless automobile take every action it can to protect its occupants from harm, even if that means “deliberately” harming other motorists or pedestrians? If the car does crash and injures someone, where does the chain of liability start and end?

The Internet of Things promises enormous benefits to consumers and businesses over the coming years. But to enjoy them fully, we will need to find effective ways to deal with the risks that will ride along with them.

 

 

1. RAND: Europe’s policy options for a dynamic and trustworthy development of the Internet of Things, 2012 p. 14

2. For comparison, in 2013 US gross domestic product was about $16.8 trillion. Seehttp://data.worldbank.org/indicator/NY.GDP.MKTP.CD

3. http://www.who.int/gho/road_safety/mortality/en/. In 2010, according to the WHO report, the number of motor-vehicle related fatalities was 1.24 million.

Date Published: 8/1/2016

 

3 Ways Crowdsourcing Is Changing the World

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We live in an increasingly networked world, where information flows freely through internet and mobile technologies. Online networks make sharing ideas and data faster and easier, improving communication and transparency. These shifts encourage collaboration, as well as competition, and have led to crowdsourcing.

Crowdsourcing combines the creativity of individuals and the strength of communities. Individuals work together to accomplish tasks may not be able to accomplish alone, and organizations recognize, promote, and scale the best ideas of individuals.

Limited time, manpower, and resources no longer have to hold individuals and organizations back from innovation. Sometimes, all it may take is an internet connection and an ‘open call’ to invite in the power of the crowd. Here are 3 ways that crowdsourcing is transforming the world:

1. It’s helping solve important problems in science and medicine

The right mix of collaboration and competition can produce major scientific advances. In fact, organizations have been solving challenging scientific problems through crowdsourcing for centuries. In 1714, when the British government hoped to find a simple, reliable way to measure the longitudinal position of a ship at sea, they offered financial incentives to anyone who could come up with a solution. The competition inspired participants to develop numerous new technologies, from marine timekeepers to lunar telescopes.i

Today, organizations working to find cures for deadly diseases are using crowdsourcing to speed up data analysis and move more quickly towards a cure. The need to perform simple tasks thousands of times, such as noting the color and severity of cancer cells in tens of thousands of slides, can cause bottlenecks in cancer research. By building an online application that engaged users to identify cancer cells in images, one charity was able to rapidly analyze over a million images of molecular markers in breast cancer tumors with a high degree of accuracy.ii Similarly, by setting up an online puzzle, scientists were recently able to solve a crucial problem that had stumped them for fifteen years: it took only ten days for players of the online game to discover the structure of a key protein involved in the reproduction of the HIV virus.iii

2. It’s helping individuals and governments share data to create change

Today’s cities are becoming more and more like crowdsourcing platforms, as local governments open up their data and challenge citizens to contribute their skills for the public good. After making its data on its terrain and transportation publicly available, the city of Rennes, France put out an open call for apps that could make the city more accessible. The winning team used Rennes’ data on tens of thousands of sidewalks to build an app that maps accessible routes for people with disabilities.iv The app also uses a crowdsourcing approach to continuously improve the city: users of the app can edit and comment on the accessibility of places of interest, from streets to bus stops to parking spots, helping the city evaluate its compliance and take tangible steps towards greater accessibility.v

This emerging concept of the city as a platform, where citizens can ‘log in’ to share their data, provide feedback on city conditions, and work to create improvements, is empowering a new population of citizen data scientists, citizen journalists, citizen app developers, and more. Through crowdsourcing, individuals are contributing their talents to help solve pressing social challenges in collaboration with elected officials. Soliciting input and innovations from the public through crowdsourcing is also helping city governments to solve pressing problems more quickly and transparently.

3. It’s empowering everyday people to become innovators

By connecting individuals with the institutional support that can translate ideas into impact, crowdsourcing can open new opportunities for innovators of all ethnicities, genders, and ages. Working alone, individuals may not have the resources to translate bright ideas into action. Today, organizations can provide the resources and financial backing to help innovators reach their potential.

Organizations who crowdsource new ideas, publicize these ideas, and help translate them into real-world action are seeing that innovators exist in many places and defy all stereotypes. When we look at the winners of the world’s crowdsourcing challenges, we see advanced prototypes of new technologies coming from high school students, breakthroughs in science and engineering coming from women, and strategies to improve communities in crisis coming from the people within these communities themselves.

At AIG, we’re inviting eligible participants to translate their ideas into action to help us build a safer future. We’re giving eligible college students with an innovative idea that can improve safety or reduce risks a chance to join our challenge. Develop an app, design a game, or create a new IoT device that can make the world safer. For a chance to join the University Challenge, click here. For more information on the challenge, eligibility, rules and judging criteria, see the AIG University Challenge Official Rules.

To learn more about how crowdsourcing is changing our world, read Part II of our series on crowdsourcing and innovation. Next up, you’ll discover how crowdsourcing is enabling organizations to incorporate more diverse perspectives, how crowdsourcing is bringing new opportunities—and new risks—to startups and investors, and how crowdsourcing is helping companies like AIG leverage great ideas and bring them to life.

 

 

 

The content contained herein is intended for general informational purposes only.  Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.

i “Longitude rewards.” Wikipedia. Wikipedia Foundation, Inc., 5 Sept. 2016, en.wikipedia.org/wiki/Longitude_rewards. Accessed 8 Aug. 2016.

ii Candido dos Reis, F. J., Lynn, S., Ali, H. R., Eccles, D., Hanby, A., Provenzano, Elena,…Pharoah, P.D.P. “Crowdsourcing the General Public for Large Scale Molecular Pathology Studies in Cancer.” EBioMedicine, vol. 2, no. 7, 2015, www.ebiomedicine.com/article/S2352-3964(15)30016-5/pdf. Accessed 8 Aug. 2016.

iii “Foldit.” Wikipedia. Wikipedia Foundation, Inc., 25 May 2016, en.wikipedia.org/wiki/Foldit. Accessed 8 Aug. 2016.

iv “What is the purpose of Open Data?” Brussels Smart City. The Smart City Portal of the Brussels-Capital Region, 24 March 2016, smartcity.brussels/news-121-what-is-the-purpose-of-open-data. Accessed 8 Aug. 2016.

v Handimap.org – La ville accessible à tous. Handimap, 2016, handimap.org. Accessed 8 Aug. 2016.

Date Published: 9/13/2016

Firms Leading the Connected Economy

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The pace of change that innovative technology brings is everywhere we look. Just 10 years ago, no one had heard of an iPhone®.1 Today, over 700 million devices and eight versions later2, we are using them to track our health, monitor the kids, control the air conditioner at home while we’re at work, and much more. To call it a phone understates its value; I don’t know what I would do without mine. Six years ago, Uber did not exist. Today it’s providing more than 1 million rides per day3, is valued over $50 billion4, and doesn’t own the vehicles that its users share. For us as consumers, it’s exciting.

Less evident, but more impactful, is how innovative technology, including the Internet of Things (IoT), is adding value to commercial businesses. To understand this trend as something that solely impacts consumers is a myth. In a recent AIG poll of global risk managers from large multinational companies, disruptive technology and cybersecurity were ranked one and two, respectively, when asked what keeps them up at night. Understandably so, they are two sides of the same coin. While some companies may be losing sleep, others are capitalizing on the fact that twice as many U.S. consumers were optimistic about the IoT than were fearful.5

The benefits to business are real and here today, as outlined in these case studies. Daimler’s driverless truck is licensed for tests on the open road now. ABB’s tunnel drilling machines are wired for preventative maintenance, and have already saved their users millions of dollars in unplanned downtime. The farms that John Deere’s equipment serves are connected to the cloud at this very moment. Work sites like CitiField are experimenting with Human Condition Safety’s sensor technology now. Just to name a few.

In 2016, we’ll witness some companies move beyond IoT in the abstract to concrete implementation. Those with their heads still “in the cloud,” so to speak, risk falling behind. Just look at the speakers invited for the 2016 Consumer Electronics Show — IBM, General Motors, Samsung and, for the first time, AIG — for further evidence that some commercial businesses are using technology to innovate quickly.

In our conversations with AIG customers around the world, one common thread emerges when we talk about how to successfully implement IoT technologies: The only way to keep up is to learn from each other.

This is true within companies, where keeping pace with rapidly evolving technology and customer demands requires better communication and collaboration. It’s no longer sustainable for departments overseeing research and development, product lines, information technology, financial operations and risk management to operate independently of one another.

It is also true at the enterprise level. The IoT is breaking down the barriers that once stood within and between industries. New tools, bigger data sets and changing customer expectations are requiring companies that have never seen each other as partners — even companies that historically have competed with one another — to start sharing information and working together to create innovative solutions for the modern digital age.

Our hope is that by highlighting AIG customers that are implementing innovative technologies including those tied to the IoT ecosystem, we can foster discussion and collaboration within and among previously disconnected industries. It’s all part of our vision to become our customers’ most valued insurer — not just by providing valuable insurance products and high-quality services, but by bringing our clients together to share insights and learn from one another.

When the solutions are just as innovative and connected as the technology itself, we all win.

 

 

 

 

1 iPhone® is a trademark of Apple Inc., registered in the U.S. and other countries. This publication is independent of and has not been authorized, sponsored, or otherwise approved by Apple Inc.

2 http://www.theverge.com/2015/3/9/8164357/apple-watch-event-700-millioniphones-sold 

3 http://www.forbes.com/sites/ellenhuet/2014/12/17/uber-says-its-doing-1-millionrides-per-day-140-million-in-last-year/ 

4 http://money.cnn.com/2015/10/27/investing/uber-ford-gm-70-billion-valuation/

5 AIG poll

Date Published: 6/24/2016
Author: Rob Schimek

Haka 360° Brings the Fan Experience to Life

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Until now VR wearables have primarily been the domain of gamers, but the head tracking and interactive gesture recognition they offer is starting to see broader industry experimentation and application.

 On the Pitch with the All Blacks

Combining a love of rugby with a passion and commitment to innovation for its customers, AIG is pleased to bring Virtual Reality (VR) innovation to All Blacks fans through our branded Haka 360° campaign. The virtual Haka 360° experience app directly connects fans with dynamic All Blacks content which can be brought to life with the use of VR headsets. Imagine standing on the pitch amongst the All Blacks pre-match, watching the team performing the traditional Maori Haka up close. This is the thrill the Haka 360° app and headset delivers.

 The Reality of VR

Until now VR wearables have primarily been the domain of gamers, but the head tracking and interactive gesture recognition they offer is starting to see broader industry experimentation and application. Facebook was one of the first large companies to envision the future, featuring in daily headlines with their rumored interest and eventual acquisition of VR champion, Oculus VR, for $2 billion in 2014.1

For clarification, it’s worth pointing out the difference between Virtual Reality and Augmented Reality (AR). A VR user is completely removed from the external (or “real”) environment, usually with a fixed headset and compatible headphones. However, AR users exist simultaneously in the “real” and virtual environments by way of information layered on an external screen, for example with a handheld smartphone or AR wearables.

Today’s VR is not altogether new. With a legacy tracing back to the 1950s, the next generation of VR is breaking free from the confines of the 2D frame to bring users a fully integrated 3D immersion experience enlivened by 360 degree visuals, spatial audio, and responsive motion sensors.

 Early Days: Insurance and VR

In varying capacities, some insurance companies have already incorporated VR into their health and financial protection service offerings, most often through simulated road safety, workplace hazard, and disaster preparedness training. VR-enabled drones are further prospects for quick deployment, expediting steps to claims fulfillment. VR can additionally function as a therapeutic wellness aid, facilitating physical and mental recovery. While it remains early days for insurers to fully engage VR as standard practice, viewing publicly available footage displayed on VR headset quickly showcases the new pathways to possibility opened by these frontier technologies.

This article originally appeared on www.haka360.com. To learn more about how AIG was able to give All Blacks fans the ultimate Haka experience with 360° video technology click here.

AIG Haka 360° Experience

For the optimal 360° viewing experience please view in Google Chrome, or the updated YouTube app on Android/iOS and select the highest available quality.

 

 

1 The Wall Street Journal: Facebook to Buy Virtual Reality Firm Oculus for $2 Billion; Social Network Agrees to Pay $400 Million Cash Plus Stock for the Goggle Maker, March 25, 2014.

Publish Date: 6/14/2016

Drones: A New Way to Help

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When Typhoon Goni hit Japan, causing catastrophic damage, AIG deployed drones to more rapidly help clients in the danger zones. In the aftermath of the typhoon, one of our Japanese clients was experiencing water damage from the ceiling of their factory. Our client needed to determine the source of the leak quickly, but it was too dangerous for anyone to venture onto the roof to perform an inspection. We knew it was important to act fast to protect our client’s property and give them the financial support they needed to recover from the typhoon. We used a drone to help locate the source of the leak. By flying the drone over the factory rooftop, our team identified the cause of the damage quickly, safely, and accurately.

By rapidly gathering imagery, information, and data after a disaster, drones can help organizations deliver assistance sooner to the people who need it. Watch the following video to learn more about how drones can help people and businesses achieve greater resilience in the immediate aftermath of a natural disaster:

The content contained herein is intended for general informational purposes only.  Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.

AIG deploys drones globally for risk management and disaster response

AIG has acquired and implemented drones to assist, augment and accelerate inspections for risk assessment, risk management, loss control, and surety performance for our customers. Since receiving permission from the FAA to operate drones in the U.S. in April 2015, we have successfully deployed our highly trained drone team to live risk and loss inspections both in the U.S. and abroad. Our pilots have flown at stadiums, hotels, office buildings, private homes, construction sites, energy plants, and more, bringing valuable new insights to our customers.

Date Published: 8/10/2016

Rise of the Cobot: New Robotics Risks

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An Interview with David Kennedy, Esq., Product Development Manager, AIG

You can tell a technology is an important one when people begin to address the risks. Today, as humans and machines work more closely together than ever, the safety of collaborative robots, orcobots, is of vital concern for manufacturers, end users, insurers, lawyers, and lawmakers alike.

Cobots are clearly on the minds of forward thinkers who seek to manage and reduce risks. The law firm Littler Mendelson P.C. recently sponsored this Robotics Business Review webcast on cobots, safety, and liability.  In addition, the insurance credit ratings and information provider A.M. Best recently hosted this webinar on managing the risks of the shifting robotics industry.

Lighter weight, more easily programmable, and more flexible and affordable than traditional industrial robots, cobots allow humans and machines to work alongside each other on complex tasks ranging from lifting and placement to assembly and packaging. For businesses, the benefits of cobots are already becoming clear. Cobots give human workers new tools to accomplish tasks more quickly, efficiently, and with greater insight than ever before. Especially for small and mid-sized businesses, cobots can generate rapid improvements in productivity and growth—and even make workers’ jobs safer and more engaging by automating dangerous, rote, or monotonous tasks.

Yet in working so closely with humans, cobots also represent potential hazards in the workplace. Robots can be large and move quickly, and they often wield dangerous tools. Malfunctioning wires and machinery in the cobot, a software error in the cobot’s program, or even an environmental condition like a slippery floor in a factory can lead to a robot causing serious injury to a worker. And with advances in artificial intelligence (AI), a self-learning robot on the job can learn things and act in ways the manufacturer and end-user may not have intended.

So who is responsible when using a cobot leads to a loss? To learn more about the liability issues involved in the rise of the cobot, we talked with David Kennedy, Product Development Manager for Robotics ShieldSM, AIG’s award-winningi, comprehensive risk management solution for the robotics industry.

Tell us about the current state of the robotics industry. What emerging trends do you see?

Robotics is a rapidly growing market. The global robotics industry in 2015 was a 28 billion dollar industry, and it’s expected to exceed 151 billion dollars by 2020, according to a report from the market intelligence firm Tractica.ii

Robotics is really the next major global innovation. It’s the next general purpose technology to forever transform the workplace. In the coming ten years, the impact of robotics on the way employers and employees operate and interact will be as great as, or greater than, the impact that the internet has had on the workplace in the last ten years.iii

Already, you have advanced robotics and AI systems being deployed across a variety of industries around the world. With the rapidly growing market and the rapidly evolving technologies comes the potential for a rapid expansion of new and emerging exposures.

While industrial robots have been around since the late 1950’s to early 1960’s, these robots have typically been confined to major manufacturing plants, and they have usually been behind cages—to protect human workers from these massive, automated industrial machines. But now, with these rapid advances in technologies and reduction in costs, with new algorithms and with the development of AI systems, you see smaller, more flexible, and more user-friendly robots: you see robots coming out of their cages. You see a huge growth of what people call cobots or collaborative robots.

Robots are working alongside humans in the workforce—on manufacturing floors, in hospitals, and more. When I talk about robotics, I use that term quite broadly. I not only include what you’d consider traditional robots, for example, industrial robots and these more recently developed cobots. I also include telepresence robots that can perform services remotely and even software platforms that can perform a task that’s previously been done by humans.

With the rapid growth in the robotic industries comes this growing risk: the grey area in coverages between traditional product and general liability insurance and professional errors and omissions insurance. What we have seen is the potential for product liability insurers and professional liability insurers to point the finger at each other at the time of the claim. The grey area in coverage can be eliminated by providing a streamlined solution for those robotics risks.

What are some of the new risks that are coming up in the robotics industry?

It’s an emerging area. There’s the potential for high-profile claims that may send robotics manufacturers, integrators, and end-users of robotics systems looking for more guidance and clarity in their risk management solutions and their insurance coverages. It’s critical for companies to consider and prepare for the legal challenges arising from robotics, AI, and automation. When a robot-related accident occurs, the potential for ambiguity is growing, and so is the potential for grey area.

For example, we’ve been talking about these cobots. The affordability and flexibility of cobots means they are especially suitable for small and medium-sized companies, the companies that make up the majority of the global manufacturing industry. These smaller companies may not have as much experience with robotics and may face new risks.

Historically, we’ve had large, industrial, automated robots—think production line robots in auto manufacturing. Now you can easily move these cobots around the workplace, and they can give rise to new employment liability issues. Especially as you introduce sensors and cognitive computing into these cobots, you may see the potential for OSHA, HIPAA issues, and privacy issues in the workplace.

With traditional industrial robots, you have a machine that’s been designed and manufactured primarily for one specific purpose, for one task only. But now, you have developers and programmers who can create programs for cobots and other robotic systems to make them perform different tasks. Couple that with AI and the ability of robots to sense and gather information around them, react to their environment, and act on their own, and the liability issues get greyer. Is it the manufacturer of the robot, vehicle, or cobot who’s liable? Or is it the software developer? Or is it some other component manufacturer that gets involved in those types of claims? So you can see how the liability landscape gets greyer along this path.

You’ve mentioned a grey area between professional liability and product liability. In the case of a cobot, ‘professional liability’ would mean that a human was responsible for the accident, whereas ‘product liability’ would mean that the manufacturer of the robot was responsible?

Yes, that’s actually a pretty precise breakdown of it. A professional liability claim would generally arise from an error made by the software programmer or the robotics services company, whereas a product liability claim would generally arise from a manufacturing problem with the robot.

So how do you determine who is responsible—or what is responsible—for a robotics risk?

That’s an excellent question. Applicable laws, regulations, and industry standards give some guidance. For example, the International Organization for Standardization (ISO) recently published their robotics industry guidelines, which specify safety requirements for collaborative industrial robot systems and the work environment.iv

Ultimately, however, the courts will have to parse this out. As is often the case with advanced technologies—frankly, drones are a great example—the law and regulations can be slow to keep up with the technology. You see legislators and governing authorities struggling with these issues about how to regulate emerging technologies and whom blame will be assigned to: whether it’s the manufacturer or the developer or the end user of these systems. It’s a complex question, and it will play itself out over the coming years.

And in the meantime, there is a rapid advance of those systems. For the first time ever, you may see non-industrial robotics—think drones, personal robots, enterprise workplace robots, and service robots—begin to overshadow the more traditional industrial robots in the next few years.v You may see a shifting landscape of risks and potential exposures.

Can you give an idea of some of the different types of robots on the rise today? You mentioned service robots. Are those robots that assist the elderly?

Yes, that’s one example of service robots. Japan is a leader in the space. In Japan, you’re already seeing a huge discrepancy between an aging population and low birth rates, and there is a growing need for service robotics and eldercare robotics. Japan is really on the cutting edge of developing technology like personal service robotics to help the elderly in their homes and with daily tasks and medications. These are incredibly relevant and timely technological advances for aging populations in Japan and, increasingly, for the U.S. as the Baby Boomer generation starts to retire.

In a similar vein, there are companies that are developing exoskeletons, a type of wearable robotics. You can use these types of robotics for the disabled and the elderly to help where there might not be nurses or medical personnel or relatives available. One extraordinary example is Marsi Bionics in Madrid, Spain. 17 million children worldwide are affected by neurological diseases that render them unable to walk and wheelchair bound. These children’s quality of life could be largely improved if walking could be repaired, restored, or rehabilitated. Marsi Bionics is working towards this goal by developing the world’s first child-exoskeleton robotic frame to help children as young as three stand and walk.

You said earlier that robotics is the next internet, in that it’s shifting relationships that humans have and the ways that we work. Why do you think robotics the next internet?

There’s a famous study published in 2013 which suggests that as many as 47% of jobs currently done by workers in the U.S. will be done by robotic machines and software within the next two decades. More recent studies estimate that less than 10% of jobs are at risk.vi So there likely isn’t going to be a 50% unemployment rate. But there is going to be a tremendous amount of technological change in the workplace.

I’m not just talking about a production line at an auto factory or highly rote administrative tasks. I’m talking about legal jobs, financial industry jobs, and other white collar jobs. Many traditional professional service industries will be dramatically transformed by robotics and automation in the next decade or two. And that’s why many suggest, including our colleagues at Littler Mendelson’s Robotics, AI, and Automation Industry Groupvii, whom we partnered with very closely in developing Robotics Shield SM, that robotics is the next innovation that will be as influential in changing the workplace as the internet itself.

Think the steam engine. Think electricity. Think information technology and how great an impact those advances had on our society as a whole, and robotics can dwarf even those. It’s exciting to think about. Think about writing. Recently, a high-profile news agency has experimented with having algorithms automatically write news stories and articles about current events. It’s just fascinating to see some of the changes that can come about.

In my opinion, it reminds the workforce to stay adaptable and creative and continue to learn. You don’t want to stop learning. Creativity is future-proof. Creative occupations are less likely to be automated and replaced by technologies like robotics and machine learning. You have to keep developing your personal skill sets to stay marketable and stay ahead. It’s pretty fascinating!

The content contained herein is intended for general informational purposes only. Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.

i  Esola, Louise. “2016 Innovation Awards: Lexington Insurance Co. Robotics Shield,” Business Insurance, 13 Mar. 2016. Web. 2 Aug. 2016.

ii  Tractica. “Global Robotics Industry to Surpass 151 Billion by 2020,” Tractica, 19 Nov. 2015. Web. 28 Jul. 2016.

iii  Mathiason, Garry et al., The Transformation of the Workplace Through Robotics, Artificial Intelligence, and Automation: Employment and Labor Law Issues, Solutions, and the Legislative and Regulatory Response. Littler Mendelson P.C., 2016. Web. 2 Aug. 2016.

iv  International Organization for Standardization. Robots and robotic devices – Collaborative robots. ISO/TS. 2016. Series Number 15066. Web. 2 Aug. 2016.

v  Tractica. “Global Robotics Industry to Surpass 151 Billion by 2020,” Tractica, 19 Nov. 2015. Web. 28 Jul. 2016.

vi  The Economist. “March of the machines: What history tells us about the future of artificial intelligence—and how society should respond,” The Economist, 25 Jun. 2016. Web. 1 Aug. 2016.

vii  “Robotics, Artificial Intelligence (AI) and Automation.” Littler Mendelson P.C. Web. 2 Aug. 2016.

Marsi Bionics and the Spanish National Research Council Are Developing Robotic Exoskeletons to Help Children with Disabilities Walk Again and Improve their Quality of Life

Video by the Spanish National Research Council (CSIC)

Date Published: 9/1/2016

How to Safeguard Couture Collections

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While high-net-worth individuals in the U.S. pay around $5 billion in annual insurance premiums,  most are not buying coverage from providers that can adequately protect the full range of their personal property assets.

One frequently overlooked area involves cherished items hanging in a closet at home or packed in a suitcase when on the go: designer and couture (also known as made-to-measure) clothes, shoes, and handbags. These high-value fashions and accessories are wearable art — precious, bespoke, and sometimes one-of-a-kind pieces created with great care and precision in an atelier and moved into a closet to become part of a person’s private collection. With haute couture price tags reaching six figures, the value of an extensive fashion collection can extend into the millions, with a single piece costing as much or more than an automobile.

“Much like collectors of fine art, vintage cars, or wine, customers who invest in their wardrobes can be quite passionate about their acquisitions,” says Ron Fiamma, Vice President and Global Head of Private Collections for AIG Private Client Group.i

Couture wardrobes can leave collectors exposed

Designer or couture items are impeccably crafted by highly skilled hands to meet a person’s specific taste, figure, and stylistic goals, meaning they cannot be easily fixed or replaced if damaged. Many fashion aficionados and collectors mistakenly assume their couture clothing and accessory collection is covered by their homeowners insurance policy. While homeowners insurance may cover some major areas of home damage caused by a flood, fire, or another disaster, it typically does not cover high-value garments and accessories. And wily intruders like moths — capable of inflicting serious damage on delicate fabrics — are usually not covered at all by these policies.

Doug Greenberg,  the owner of Garde Robe Online, LLC, the first museum-quality garment storage service for precious clothing, footwear, furs, and accessories collections, grew increasingly concerned when the majority of his clients declined the insurance policies his firm offered for clothes stored in its facilities.

When Greenberg learned that a client’s home — and the couture collection housed within it — was flooded by Super Storm Sandy, and the bespoke wardrobe was not covered by homeowners insurance, he approached AIG about creating a solution to fill the coverage gap.

AIG Private Client Group had also spotted the need for more precise protection. AIG risk managers often visit customers’ homes to help identify vulnerabilities that could lead to property damage if left unchecked. On one visit, the significant financial risk many individuals unknowingly assume became even more apparent when a risk manager came across a collection of 150  ultra-luxe designer bags, with a price tag of $20,000 or more per bag.

Bespoke protection for bespoke wardrobes

To develop a specialized coverage solution that meets collector realities and concerns, AIG underwriters visited designer studios and ateliers and interviewed Garde Robe’s clients to learn about the skill, craftsmanship, precision, and materials involved in the creation of high-end fashions — as well as the underlying passions and goals of the people who collect them.

“Just as a collection of vintage automobiles has different coverage needs than an everyday car in the driveway, we realized that couture and bespoke clothing needed to be safeguarded differently than ordinary household items,” Fiamma explains. “Very special fashions are wearable art collections that require comprehensive protection.”

In September 2015, AIG Private Client Group launched the first-ever wearable collections coverage — the only specialized insurance currently available to protect and proactively mitigate risks for high-value couture and designer wearable collections.

The comprehensive insurance addresses specific gaps in traditional homeowners policies, covering couture and ready-to-wear garments, shoes, handbags, and vintage and historic clothing, as well as custom, work-in-progress couture and shoes. It covers damage caused by flooding, moths, vermin, theft, and accidents, as well as the cost of moving items to a safe storage facility before an impeding threat — risks that are frequently excluded from a homeowners policy. If a piece is damaged or destroyed by a covered loss, dry cleaning and restoration by a high-end garment care specialist will be covered, a typical prerequisite for acceptance into a secure garment storage facility.

The coverage is in effect worldwide — wherever and whenever the policyholder chooses to travel with or wear their garments or accessories. The policy also includes services such as vulnerability assessments, emergency planning, and referrals to wardrobe-preservation specialists. In addition, AIG Private Client Group’s in-house collection management specialists work with clients to help them preserve the long-term value of their couture and designer collections.

The wearable collections coverage is available to individuals who are eligible for AIG Private Client Group’s solutions and services as an endorsement to the private collections policy, which includes additional advantages such as agreed value coverage, no deductibles, and loss in value payments.ii

To learn more about AIG’s private collections policy — offering distinctive protection for fine art, wine, jewelry, couture, and any other items you prize — visit: https://www-200.aigprivateclient.com/index.php?Page=private-collections-insurance-coverages.

For more information about AIG Private Client Group — serving high-net-worth individuals with innovative, flexible, and customized insurance solutions — visit:http://www.aig.com/individual/insurance/private-client-group.

i AIG Private Client Group is a division of the member companies of American International Group, Inc. (AIG).

ii The wearable collection coverage is available today across the U.S., in all states except Massachusetts.

The content contained herein is intended for general informational purposes only.  Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.

Proactive Protection for Collectors

You may not think of yourself as a “collector,” but even a few pieces of fine art, jewelry or valued objects warrant special attention when it comes to their financial protection. Items often have sentimental worth as well, and preserving value on both fronts requires an ongoing effort. The in-house Collection Management team from AIG Private Client Group, a division of the member companies of American International Group, Inc., is here to help. We share our customers’ passions and are on hand with answers and support. (Eligibility requirements may apply.)  Learn more: http://spr.ly/6053BkZxv.

Date Published: 8/10/2016

How Sensors Can Change Insurance

As the Internet of Things grows, the number of sensors in our world is dramatically increasing. The ability of these sensors to capture and deliver data in real time can create a future where people and companies can observe events and respond with action more quickly than ever before.

Sensors are already a part of our daily lives: the average smartphone contains a variety of sensors, including an accelerometer to measure motion, a pedometer to measure the steps you’ve taken, and a fingerprint sensor for added security. Sensors also enable a range of popular devices, such as bracelets that track our physical activity over the course of the day to help us improve our health and smart thermostats that learn our habits to customize the temperature in our homes. Ultimately, sensors enable us to more fully understand and control the conditions that affect our lives.

Sensor-based devices are also helping insurance companies provide clients with new, customized services that can mitigate risks. At AIG, we recently partnered with one of our clients, a car rental company, to create a pilot project testing whether we could: 1) incentivize smooth driving—that is, maintaining safe speeds, not accelerating harshly, and not using ‘hard breaking’, and 2) find out whether smooth driving was an indicator of safe driving. In this test, sensors in the client’s fleet of vehicles collected data in real-time to help develop a ‘smooth driving score’ for each driver who chose to participate. To further encourage safer driving, we created a contest that rewarded the smoothest drivers with prizes. Not only was this game extremely popular with drivers, (less than one percent of drivers opted out), the contest also succeeded in significantly reducing the number of claims for our client by incentivizing renters to drive more safely. Furthermore, the client was able to engage with its customers in a unique way and further its commitment to road safety in partnership with AIG.

At AIG, we believe the future of insurance is proactive risk prevention. The insights gained through sensors enable AIG to better serve our clients; we can help our clients uncover areas of risk and implement tailored solutions to help prevent losses. In partnership with a major university with cutting-edge research in this space, our research team is testing water sensors that can detect abnormal flows in water pipes. With these sensor systems in place, it can be possible for our clients to receive automatic text-message alerts in the event of a leak, or even have the system automatically shut off the water supply to prevent flooding. By encouraging our clients to use water sensors in their homes, warehouses, and other properties, AIG has the potential to protect our clients’ assets from flood damage.

Alerts sent by sensors can help prevent risks to clients’ property; preventing risks to clients’ health and safety can be more complex. AIG is now working to enable the sensor solutions that can help reduce workplace injuries and deaths in high-risk areas such as construction sites and manufacturing facilities. To help our clients improve their workers’ safety, we’ve invested in Human Condition Safety. This startup is developing solutions, including wearable sensor devices for workers, which have the potential to reduce workplace accidents, improve efficiency, and help AIG and our clients gather real-time data to better predict and prevent risks. Effective feedback based on data from wearable sensors has the potential to help workers learn to adopt safer behaviors. For example, a construction worker who receives repeated input from wearable sensors reminding him that he is lifting heavy objects in a way that causes back strain may, over time, change his habits and move more safely while lifting equipment at work. In addition to helping provide feedback to workers, sensors may also give insurance companies and clients the data needed to learn more about how to prevent common workplace injuries.

In fact, AIG has a large volume of claims data: our nearly 100-year history gives us remarkable insights into what causes accidents of all kinds, from slips, trips, and falls in the workplace to fires and floods. By applying advanced analytics such as Natural Language Processing and machine learning to our data, we are finding patterns in what is causing common accidents and injuries for our clients. Understanding the core factors that cause accidents and injuries helps us to identify target areas where we can apply sensors and the Internet of Things to create solutions that help reduce risks. In addition, programs such as Client Centric Analytics are accelerating AIG’s capabilities to pinpoint the risks that drive clients’ losses and to offer solutions that improve clients’ safety to help reduce our clients’ total cost of risk.

As sensors and the Internet of Things evolve, they are bringing new data and capabilities that can improve safety and resilience for businesses and individuals. With these technological advances, the next generation will be able to learn from human interactions with our environment, use machine learning methods to predict adverse events, and mitigate losses before they occur.

Date Published: 7/5/2015

Your Custom Home Can Be Your Safe Haven

Home is where the heart is, as the old saying goes — it’s also where people spend a significant amount of their time, and an important retreat and refuge from a frequently hectic world.

Building a custom home is a compelling idea for people and families who are looking to create their own special “safe haven” — a unique home tailored to the nuances of their tastes, needs, and lifestyle, rather than adjusting those preferences to fit an existing structure and layout. Many Americans are opting to build, not just buy; in the first quarter of 2016, custom home building increased on a year-on-year basis, accounting for 22% of total single-family starts.i

Constructing a house from the ground up involves an array of aesthetic choices including size, layout, materials, flooring, lighting, storage, colors, and much more. But beyond these details, there are crucial up-front decisions that can have a direct impact on how safe of a haven a home will be — either enhancing or compromising the safety of the house, lessening or increasing the likelihood of loss, and ultimately translating into insurance savings or additional costs.

Reducing risks before breaking ground

In many instances, home risk mitigation techniques are much easier to implement before and during the building process instead of post-construction. In the early planning stages with an architect, integral risk prevention questions can be discussed and woven into construction plans, including:

  • Is there a smarter way to build the house, making it safer without disrupting design plans? This can include sensors to detect water leakage, and fire sprinklers or gas leak detectors to spare residents and belongings from harm.
  • How can the house be protected against natural hazards, including flooding, wind, lightning, and earthquakes?
  • How can sound environmental practices be incorporated into the project, including green building materials and other choices to maximize energy efficiency?
  • What is the best evacuation plan for residents in the event of an emergency?

Smarter building for worry-free living

Over the years, AIG Private Client Group, a division of the member companies of American International Group, Inc., risk managers — specializing in the protection of luxury and custom homes — have visited tens of thousands of properties to advise on safety measures and other concerns, observing costly home damage that may have been avoided if different decisions were made before and during home construction.

Drawing from a long history of bringing sound risk management practices to the construction of many of the world’s most significant buildings, AIG offers SmartBuild, a solution to help homeowners make smart decisions to manage risks long before they break ground on their custom home.

As a complimentary service for qualified1 AIG Private Client Group policyholders who are ready to begin the construction of a new home or major renovation, SmartBuild incorporates best practices to help homeowners build a smarter and safer home:

  • A pre-build consultation: An experienced risk manager consults with the homeowner, architect, builder, contractor, and other home and design professionals during the design phase to help minimize risks related to water damage, fire and life safety, security, and other construction vulnerabilities — asking crucial risk management questions a homeowner may not know to ask.
  • An outline of safety measures: Once the home is built, a risk management specialist provides an overview outlining the safeguards that were put into place during the build.
  • Potential additional premium savings, which may be available in some instances to policyholders who integrate the suggested loss prevention measures into their home.

To learn more about how the AIG Private Client Group helps policyholders build smarter, safer custom homes, reducing the likelihood of loss before construction begins, read the brochure below. 

1 Typically this translates to a $5 Million new or remodel project

 

i National Association of Home Builders, May 18, 2016: http://eyeonhousing.org/2016/05/slight-gains-for-custom-home-building/.

 

The content contained herein is intended for general informational purposes only.  Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.  

 

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. (AIG).   For additional information, please visit our website at www.aig.com. Products and services are written or provided by subsidiaries or affiliates of AIG. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

Smart Build: Risk Management for Custom Homes

 

AIG Private Client Group, a division of the member companies of American International Group, Inc., specializes in the protection of luxury and custom homes. Over the years our risk managers have visited tens of thousands of properties to advise on safety measures and other concerns. We’ve seen what works—and what doesn’t. In many instances, we’ve found that costly damage could have been avoided if different decisions were made from the start. Armed with this experience, we created Smart Build, a complimentary service for policyholders who are ready to begin the construction of a new home or major renovation. (Eligibility requirements may apply.)

Date Published: 7/25/2016

2 Ways to Build your Business with IoT

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There are, even by the most conservative estimates, billions of objects and devices connected to the Internet. Various estimates place the total number of connected devices between 40 to 50 billion by 2020; and these devices together make up the Internet of Things (IoT).

Companies across a multitude of industries are pioneering this technology and demonstrating its long-term potential. According to one forecast, spending on industrial connected objects this year alone will total nearly $870 billion, compared with $546 billion for IoT devices on the consumer side.

The improvements in efficiency, analytics, predictive maintenance, troubleshooting and forecasting that have resulted, even in this early stage of IoT implementation, consistently point toward an economy that is more efficient, productive, safe and profitable.

In our latest report, “IoT Case Studies: Companies Leading the Connected Economy”, AIG found that the companies leading the industrial IoT revolution mostly fall into one of two categories of innovation:

  1. Improving Operations and Processes
    Companies such as Silverstein Properties and U.S. Bank use IoT technologies to improve their internal operations and processes, while companies such as Amec Foster Wheeler, IBM, Human Condition Safety and Ericsson are using it to provide their customers with deeper insights into their operations, their industries and the world around them.
  2. Using IoT to Transform Business Models 
    John Deere is fostering collaboration across the agriculture industry with IoT innovations that impact every aspect of farming from seed to market.

Both categories can provide valuable insight into the challenges and potential of the IoT, which is why it’s so critical that companies and leaders emphasize communication, both within their own companies and with each other. Departments that typically don’t interact with each other will need to collaborate to mitigate new IoT risks. Most notably, risk managers and research and development departments must work together to address potential risks created by new connected products and services. Closer collaboration between different functions within an organization will help risk managers select insurance products and services that best suit the new risks brought forth by IoT technologies.

Ultimately, two things are clear: IoT technologies are here to stay, and its economic impact will be significant.

While it’s impossible to predict all of the details, we know the shape the future of industrial innovation will take. Companies that embrace innovative technologies, including IoT, are already changing the world we live in. With a commitment to innovation and an openness to disrupt themselves, these few will be best positioned to lead their industries, and may even create new markets.

To learn more read “IoT Case Studies: Companies Leading the Connected Economy”, or visit www.aig.com/innovative-tech.

Date Published: 6/10/2016

How to Manage Today’s Aviation Risks

Private jet plane in the blue sky

In 2016, significant safety or security events have posed challenges to the airline industry.  In March, Flydubai Flight 981 en route from Dubai, UAE to Rostov-on-Don, Russia crashed during its second landing attempt. All 7 crew members and 55 passengers were killed. And in May, Egypt Air Flight MS804 mysteriously disappeared, with 56 passengers and 10 crew members on board, while en route from Paris, France to Cairo, Egypt.1 While terrible human tragedies, these events were, statistically speaking, highly unusual.  Indeed, the vanishing of the Egypt Air flight is not what is thought of as a “typical” airline accident.

These tragedies are statistically infrequent and serve as an opportunity to examine the long-term resiliency of the airline industry and recent long-term gains in safety.

More and more passengers are flying every year. Almost 3.3 billion globally in 2014, according to the International Civil Aviation Organization (ICAO).2 That number marked a 5.5% increase over 2013.3Competition for passengers is fierce. Airline margins, even in good years, remain tight, at around 2% to 3%. Despite this year’s major tragedies, the industry’s impressive safety record over the years has helped keep premiums at attractive levels. Given the industry’s tight margins, pricing for aviation insurance will continue to be an important consideration for industry buyers. But it is not the only factor in purchasing decisions. Risk management among airline companies is highly sophisticated, and this sophistication is reflected in their demands for coverage. As Rob Sage, AIG’s U.K. Head of Underwriting Aerospace, points out, “In addition to price, buyers were until recently also looking to broaden their coverage. However, after the spate of recent losses, price has once again become key with some buyers, even though rates are significantly lower than they were pre-9/11. The more sophisticated buyers will always be looking for the broadest cover available even if there is a cost for that.”

Coverage for Cyberthreats

One growing area of interest for many industry buyers has been protection against cyber-attacks.  Cyberthreats have become ubiquitous across most, if not all, industry verticals, and aviation is no exception. It is not difficult to imagine the kinds of damage, and not just financial, that could be caused by a major security breach at an airline or airport. As the rate and sophistication of cybercrimes and the threat of cyberterrorism grow, the risk profiles of airlines and airports are changing, and industry buyers are adjusting their risk management strategies to accommodate those changes. A number of companies in the insurance industry, including AIG, have responded by providing a number of offerings to help meet these evolving needs.4

In addition to cyberthreats, risk managers in the aviation industry are seeking to broaden their coverage in other areas as well. These range from potential liabilities relating to pollution from de-icing and fuel storage to situations involving, for example, the loss of GPS satellite communications data, which airlines rely on for navigation and terrain mapping.

Importance of Claims Handling in Aviation

As the aviation industry grows in both size and complexity, the importance of claims handling has grown. As recent incidents illustrate, when things go wrong in the industry, they can go very wrong – along multiple dimensions. Risk managers in the industry look for insurance partners that can help them navigate the sometimes labyrinth-like claims process as quickly and as painlessly as possible, so that necessary liquidity is available when and where it’s needed. Some providers outsource the claims handling function, while others, such as AIG, handle it with experienced internal claims teams. Buyers should lean toward whichever provider they believe will partner with them best in a crisis.

The aviation industry will continue to evolve in order to meet the ever-increasing demands of the flying public. In the process, industry risk managers will need to continue to regularly assess their organizations’ risk profiles to help ensure they have the breadth of coverage they need.

AIG – Unmanned Aerial Vehicles

AIG has established an international research and development program focused on utilizing unmanned aerial vehicles to survey properties after natural disasters and for risk management purposes. Click here to learn more: http://spr.ly/60014RtP.

1 “Recent plane crashes.”  Accessed online on June 28, 2016 at http://www.airsafe.com/events/last_15.htm.

2 “Annual Report of the ICAO Council: 2014 The World of Air Transport in 2014.”  ICAO report, 2014.  Accessed online on June 28, 2016 athttp://www.icao.int/annual-report-2014/Pages/the-world-of-air-transport-in-2014.aspx.

3 Ibid.

4 AIG’s principal cyberrisk solution is CyberEdge PCSM.  For more information, go to http://www.aig.com/cyberedge-pc_1247_593419.html.

The content contained herein is intended for general informational purposes only. Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.

Date Published: 7/15/2016

5 Questions to Ask Before Flying a Drone

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Unmanned aerial vehicles (UAVs) or drones have nearly unlimited potential applications outside the military including law enforcement, research, filmmaking, and even Amazon deliveries. The commercial drone market was worth $552 million in 2014, and it’s expected to reach $5.59 billion by 2020.

Because many UAVs only weigh a few pounds, some people make the mistake of viewing them as just another business tool —but drones are still aircraft, which means they bring a different set of risks and liabilities.

Drones have the potential to revolutionize business, but just as organizations are becoming aware of their advantages, they also need to be aware of the risks involved. Even if you are abiding by regulations, they could still be open to potential liability.

5 Things to Consider Before Using UAVs

Here are a few things to ask when working with drone clients:

  1. What are you flying? The make and model of the UAV provides insight to its capabilities and how it might be used.
  2. What do you plan to use it for? Is the UAV taking pictures or recording video? What does the drone operator intend to do with that video? Make sure you understand the regulations for UAVs so their usage falls under what’s considered legal in the U.S.
  3. Who will be operating it? The experience of the operator is a key factor when determining whether or not to insure a drone. Does the operator  have an aviation background or training on best practices? Has he or she ever flown a drone before?
  4. Where are you using it? There’s a significant difference between flying aUAV under 400 feet off the ground and flying at higher altitudes, where it may be necessary to engage with air traffic controllers. Operating in an urban environment also poses a greater risk than a rural area, as a higher concentration of people and property increases the possibility of an accident or claim.
  5. Does your business have written policies for operation? If you are using the UAV for business, your company should have rules in place for who can operate the drone as well as where and when. Will operators be flying at night? What about in bad weather? Does your company have procedures for coordinating with air traffic control facilities if operators need to fly near an aviation facility? All these factors are important considerations when looking at the risks involved.

Keep in mind that regulations will vary depending on the country of operation and whether the drone is intended for business or consumer use. For instance, Canada requires UAVs to have at least $100,000 in limited liability insurance for operation, whereas the U.S. has no such requirement. Regardless of where the drone is operated, the main factor when insuring one is going to be the drone’s intended use.

Date Published: 7/14/2016

By Carson Lyons, VP – Global Product Line Manager, General Aviation, AIG

How Drones Can Change Your Business

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By 2020, the FAA estimates about 542,500 small Unmanned Aircraft in the commercial fleet. Did you know, Unmanned Aircraft Systems (UASs) were used to provide security during the 2014 World Cup soccer tournament in Brazil?

Data collection and analysis are among the primary impact areas for UASs because they can quickly reach locations that are less accessible to human beings and share information in near-real time; UASs can be used to assist in the creation of risk assessment surveys and enable more rapid response to disasters.

For example, in 2015, Typhoon Goni hit Japan causing catastrophic damage; over 600,000 people were directly affected by the storm. AIG was able to rapidly deploy drone technology to assess properties affected by the storm, which allowed us to provide a fast and safe assessment of the damage.

UASs are changing the way businesses think about their operations. Another example of how UASs are being used across industries is within the agriculture industry. UASs can help farmers track the quantity and activity of cattle, monitor crop health, maturity, and irrigation; and detect the spread of weeds.

Barriers to Adoption

There are several barriers that need to be overcome in order for the U.S. economy to fully utilize the advantages of UASs:

  1. The first barrier to overcome is within the law enforcement industry.  Procedural hurdles could hold back the use of UASs, including having regulators keeping up with the rapid development of technology and adopting a “constructive, not confrontational” stance.
  2. Manufacturers and operators must adapt as well. To generate the most benefit from UASs, users need to treat them not as add-ons to their existing information-gathering and delivery systems, but as integral to their operating model.
  3. Ensuring the prevention of potential accidents and privacy violations. The Department of Homeland Security has logged over several incidents  in which rogue drones governed over “sensitive sites and critical installations,” including military bases and nuclear plants.
  4. The final barrier that will need to be overcome to fully utilize UASs includes navigating the regulatory environment including the recent “Small UAS Rule” which implements rules around visual line-of-sight with the pilot, weight limitations for the UAS including cargo weight, and more.

However, it is clear that UASs’ economic presence is likely to grow as technology improves and the benefits become more and more evident. To learn more about UASs, and their benefits across a variety of industries, read this whitepaper developed in partnership with the Harvard Business Review.

Date Published: 7/18/2016

This is an excerpt from a whitepaper created in partnership with AIG by Harvard Business Review. To read the paper in its entirety, please download the PDF. 

Equity Crowdfunding: How Insurance Can Help

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You’ve heard of Crowdrise, AngelList, and perhaps you recently invested in a new tech gadget on Kickstarter. But the concept of equity crowdfunding isn’t as simple as clicking a button and investing in a start-up. Simply put, equity crowdfunding is the exchange of a piece of a company for cash.

Recently, the SECreleased the equity crowdfunding law, Regulation Crowdfunding. The law permits individuals to invest in securities-based crowdfunding transactions with some limitations including:

  1. The amount of money an issuer can raise using the crowdfunding exemption;
  2. Imposes disclosure requirements on issuers for certain information about their business and securities offering; and
  3. Creates a regulatory framework for the broker-dealers and funding portals that facilitate the crowdfunding transactions.

One particular challenge presented by this form of funding is that unlike companies raising capital through traditional established channels, many of the issuing companies raising money through crowdfunding have little or no track record. Although they can present exciting growth opportunities for investors, these issuers can also expose investors to unknown risks particularly around the probity of their current and future governance. The key was to build trust in the ecosystem.

Reading about this growing industry, Monica Tigleanu, Senior Underwriter, Commercial Institutions, and Fred Ling, Financial Institutions Practice Leader, EMEA, became interested in the opportunities for insurance that the crowdfunding industry might offer.

“Through discussions with the industry stakeholders, […] we realized that the industry would benefit if we could protect investors from issuer fraud – a major concern not only for the investors and platforms, but also the regulators,” said Monica.

A high profile case in the U.S. emerged where an oil and gas company called Ascenergy raised $5 million from crowdfunding platforms. Around $1.2 million of that was then spent by the founders on non-business items, as well as payments to other companies owned by the founders. In late 2015, the Securities and Exchange Commission froze the assets of the company for fraud.

“This made us realize that issuer fraud risk was a proven risk we could protect against,” said Fred. “But it wasn’t simple as there are multiple parties participating in the contract: the policy is bought by the platform, it protects the investors, but the fraud event would occur within the company that receives the investment.”

Monica and Fred were able to get buy-in from senior members of AIG’s global financial lines team for their new product including Irwin Goldfarb, Chief Underwriting Officer, Commercial. They then reached out to crowdfunding platforms across the UK and Europe and found Eureeca, a Dubai-based platform registered in the UK, who were interested in the solution and were open to collaboration to develop a bespoke product.

“Thanks to the partnership with Eureeca, we were able to conduct due diligence on their business model and their investment guidelines to better understand the risks that were taken in identifying investment opportunities. That meant we could price the risk and validate the coverage,” said Fred.

Crowdfunding Fidelity was recently launched, and Eureeca is AIG’s first policyholder. “The product gives us a great connection to these growth stage companies as it aligns our strengths and customer centric values,” said Monica.

“Crowdfunding Fidelity is a great example of how AIG learns together with the industries and clients it serves to better meet their strategic needs. We are looking forward to building similar relationships with other platforms across the world and to expanding our offering to this sector,” said Lex Baugh, President, Liability and Financial Lines.

1 https://www.sec.gov/news/pressrelease/2015-249.html

The content contained herein is intended for general informational purposes only.  Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein

Date Published: 7/1/2016

Risks for Homeowners in the Sharing Economy

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The sharing economy is growing at a tremendous rate, with more and more individuals participating in exchanges of services and property. Along with car sharing companies, home sharing companies have rapidly achieved high rates of market penetration and now face increasing regulation.

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There are many benefits to peer-to-peer home rentals. A homeowner can transform a spare room into a money-making asset and even fund a whole vacation by renting out his home while he’s away. Travelers quickly and easily gain access to inexpensive, convenient, and informal places to stay—including well-equipped accommodations in unusual places. However, home sharing brings new risks for homeowners and travelers, as well.

In business terms, the sharing economy functions by lowering the transaction costs of more traditional business exchanges—for example, paying a fee to a hotel company or a city taxi commission. However, the sharing economy also creates a trust gap between the two parties in the transaction. Traditionally, it was the business’ established reputation in the marketplace which enabled trust; in order to participate in a peer-to-peer home rental system, the participants must trust one another without this traditional brand of proof. A lack of trust is arguably one of the most significant barriers to individuals participating in the sharing economy today. Innovative insurance coverage can play a vital role in helping to close this trust gap by providing the protection people and companies need to participate in peer-to-peer exchanges.

What types of risks are involved in participating in a peer-to-peer exchange such as a peer-to-peer home rental for property owners? For renters? For the home sharing company? There have been cases of renters damaging and stealing their hosts’ property: hosts have returned home to find closet doors broken and passports, birth certificates, cash, credit cards, jewelry, cameras, laptops, and hard drives missing, leading not only to lost property, but also to the risk of identity theft. Renters can face serious hazards as well: staying in a home without a carbon monoxide detector, first aid kit, or that is not ‘up to code’ when it comes to building safety can be very dangerous and potentially lethal. Regulations surrounding liability in peer-to-peer exchanges are not yet well established; personal injury incidents in shared homes can lead to lawsuits that affect both parties and damage the home sharing company’s reputation in the marketplace.

Insurance can be a valuable solution to help protect all parties involved in peer-to-peer home sharing. In 2015, through our commitment to innovation and our active response to our clients’ emerging needs, AIG introduced insurance coverage to help protect homeowners in the sharing economy. To better understand the risks involved in peer-to-peer home sharing, and to explore the risks involved in other areas of the sharing economy, see this chart:

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Date Published: 09/12/2016
Author: JEFF OBERSTEIN