Blockchain and the internet of things (IoT) are impacting understandings of data ownership and bringing benefits to certain industries, though the uses of these technologies are also shifting the conversation around cyber liability and privacy.
When it comes to blockchain and other forms of distributed ledger technology, one expert told Insurance Business that he has yet to see sweeping, sector-wide changes come from its implementation, though the potential is clearly there.
“To date, I’d say it’s probably more trouble than it’s been worth on an enterprise level because everybody wants to adopt the blockchain, but they don’t really understand what it takes to implement and why it’s beneficial for them,” said Paul King (pictured), SVP and national technical director of executive and professional solutions at USI Insurance Services, and a panelist at the upcoming Emerging Risks & Innovation Summit in New York. “The real value is going to lie in the combination of what blockchain entails, and the thought processes it is making people move towards, which is a deconstruction and decentralizing of data in many different ways, and then using the blockchain ledger technology for access to that distributed data.”
At the moment, it’s not financial institutions or multinationals using blockchain widely, but rather manufacturing and other businesses with complex supply chains. Insurance is also catching on to the application of blockchain, though, as usual, at a slower speed than other industries.
“Insurance traditionally has been a lagging take-up indicator of technological change,” said King. “Most of the risk surveys you look at will tell you that blockchain distributed ledger technology is most certainly on the minds of boards and leaders, as it should be,” but those same surveys will reveal that they struggle to understand how beneficial it can be to their businesses, as well as how to implement it and the costs associated with doing so.
“Much like AI, which as we all know has been around since the first automaton, we act like it’s something new and ground-breaking, but really, these are incremental changes in particular technologies,” explained King. “Most certainly, it’s on everybody’s minds and should be, but the real question is how is it most successfully implemented, which leads to a lot more risks in and of itself – how do we implement it and will it work – so it’s definitely a double-edged sword at the moment.”
Similarly with IoT technology, it’s the same types of businesses who are leading the way with implementation.
“When it comes to the ability of manufacturers to look at different component pieces throughout the supply chain and [be able to] tell where something is, how it’s being used, and if it’s up to specifications because of embedded IoT technologies, that’s where we’re seeing a lot of the focus of IoT,” said King. “When it comes to incremental improvements in retail products and tracking usage, and creating different user experiences, again manufacturing and retail – your traditional backbone businesses – are the ones that we’re seeing use IoT the most.”
For insurance professionals with commercial insureds using IoT, cyber liability forms often don’t contemplate connected devices, so they need to make sure they’re addressing their clients’ IoT-related risks when crafting coverage. More broadly, companies should be buying cyber terrorism and business interruption coverage to protect against potentially larger cyber incidents in the future as technology use accelerates. To further mitigate risk, businesses should be implementing employee training to help them understand vulnerabilities if they connect their IoT devices to the company’s network, as well as staying aware of the third-party vendors they’re bringing inside their doors.
“You have to be absolutely vigilant with every single one of your vendors on having them evidence errors and omissions coverage, and cyber coverage to you at a minimum, [while] working with your broker and others to make sure that it’s optimal or fits what’s needed via the contract, and working with counsel to make sure that liability transfers within the contracts are appropriate,” said King. “Those are going to be the ways that industries, companies, and individual enterprises can help themselves prepare for the cyber risk management challenges that they’re going to face.”
Take a deeper dive into this issue at the Emerging Risks & Innovation Summit in May 2019.