Nanotechnology: Thinking small

Nanorobot

With the use of nanotechnology increasing exponentially – up from 54 consumer products in 2005 to 1628 today — is this a positive advancement for insurers?

As insurers continue to get up to speed with emerging digital risks such as cyber attacks, drones and 3D printing, the development of nanotechnology and the subsequent use of nanomaterials to enhance everyday items such as cars and medicines means this too will be firmly under insurers’ microscopes.

Research by emerging technology firm Lux Research revealed 15% of all products will contain nanotechnologies by the end of 2014.

It is also true that the number of consumer products containing nanotechnologies has grown exponentially over the past decade. According to the Woodrow Wilson Center – a US policy forum – the number of nanotechnology products available has increased exponentially from just 54 in 2005 to 1628 in 2013.

Given its rapidly growing presence, is the emergence of nanotechnology a positive advancement for insurers?

For Allianz Worldwide Care medical director Ulrike Sucher, it would be hard not to see nanotechnology as beneficial. “You have to see nanotechnology in a similar way to the advances in other parts of medical technology [such as pharmaceuticals].

“Anything that leads to shorter treating times, quicker diagnostics and better results in medical situations will always benefit the insurer, because you are [paying] at the end of the day,” Sucher says. This means developments like Apple’s iWatch, which is rumoured to have glucose-measuring capabilities that would help diabetes patients, could change the game for insurers.
Nanotechnology explained
Everyday products
It is not just the medical sector that will benefit from increased use of nanotechnology. Products used by consumers every day contain nanomaterials aimed at enhancing performance and efficiency.

According to the inventory, health and fitness products are currently leading the way in terms of consumer items that employ nanotechnology. Sports equipment, clothing, cosmetics and sunscreen are all experiencing a boost from nanotechnology.

Nanotechnology is also present in cleaning products, appliances such as refrigerators and in vehicle parts, as well as in consumer electronics. According to Celent insurance practice senior analyst Craig Beattie, it is being used to improve the quality of screens and displays.

However, despite its rapid growth, several commentators consider nanotechnology is yet to come onto insurers’ radars.

Matthew Clark, La Playa science and technology practice head, says: “[Many insurers] don’t have an understanding of nanotechnology. They have not yet got to grips with the issues associated with it. Whether they know it or not, many of them are probably insuring things like product liability insurance associated with nanotechnology right now without necessarily understanding what they have taken on.”

Michael Bruch, Allianz Risk Consulting research and development head, agrees with Clark that many insurers are already covering businesses involved in nanotechnology – with this type of coverage only set to increase.

“Over time, the insurance portfolio will contain an increasing number of insureds with an increasing proportion of their commercial activities in nanotechnologies,” Bruch says.

He highlights indirect advantages of nanotechnology products in mitigating insured risks – for example, nano-embedded sensors in structures such as bridges that can report defects prior to catastrophic loss, a development that would certainly benefit insurers.

A nano particle is thought to be less than 100 nanometres wide. A nanometre is one billionth of a metreHowever, there are corners of the industry that don’t believe nantotechnology is going to set the insurance world on fire just yet. Greenwoods Solicitors partner Richard Houseago admits nanotechnology is not a topic that has so far been raised by his clients.

“It is right that it is a technology that is starting to emerge in some areas of building and construction but one would think that from looking at this from the inside it is yet to get real life traction as an issue insurers have to manage,” he says.

Beattie, meanwhile, considers insurers will feel the impact of other emerging technologies, such as drones, before nanotechnology.

“If an insurer came up to me and asked if they should be worried about nanotechnology my view would be [to question] whether they had thought about digital and other technologies that are just around the corner,” he says.

That is not to say there is a void of potential risks associated with the manufacture and consumer use of nanotechnology products. Ian Price, Zurich senior casualty underwriter, says the size of the materials are a concern as they can be inhaled, ingested or absorbed into the body – with long-term health effects still largely unknown.

Indeed, the unknown effect of handling nanotechnologies has led to speculation nanoparticles could be “the new asbestos”, Houseago says. Clark adds: “What happens if third parties become affected by the product in its everyday use? Asbestos is the most cited example of this kind of thing.

“The main kinds of risks are if you have someone handling nanotechnology on a basic level, employers’ liability [is needed] to provide mandatory coverage for employees who become injured or ill from the work they are doing,” he explains.

Environmental effect
The effect of nanomaterials on the environment will also take some time to emerge, Price predicts. He gives the example of nano-silver, which is widely used in sportswear due to its antibacterial properties.

“Concerns were raised that, as an unexpected consequence, the materials could be released into waste water systems [during washing] where the antibacterial qualities would destroy the bacteria that break down the waste materials.”

Both Price and Bruch highlight how the risks associated with nanomaterial in a ‘bonded’ form – for example, carbon particles found in tennis racquets – are less than when the nanoparticles are free, such as in sunscreen.

For Bruch, many lines of business are likely to be impacted by nanotechnology risks, including workers’ compensation, general and products liability, product recall, environmental liability, and property.

1628 is the number of consumer products containing nanotechnology at October 2013“In individual cases it will be difficult to establish a causal relationship between the actions of a company and the resulting injury or damage,” he adds.

While Beattie agrees immediate risks lie in the manufacturing of nanotechnology products, he sees this liability quickly shifting to consumers.

“Within a decade it will be in the hands of consumers and then you are getting into a whole different area of risk. As people build up technology there will be opportunity for insurers to change the way they interact with their customers and better support them in terms of managing their risk,” he says.

Another challenge could lie in the regulation of nanotechnologies, with a plethora of European Union and UK bodies overseeing products.

As Price explains, foods or food packaging containing nanomaterials are regulated in Europe by the European Food Standards Agency, while in the UK those products fall under the Food Standards Agency.

UK government bodies also provide advice – for example, the Health and Safety Executive advises employers on the occupational hazards associated with nanotechnologies. Having to comply with regulation from different bodies with different ideas on nanotechnology could see insurers reluctant to embrace this emerging risk.

As well as regulation, Andrew Auty, director of liability advisor Re Liability Oxford, says a challenge also lies in the lack of familiarity insurers have with rating nanoproducts.

“Toxicology for nanoparticles has few certainties,” Auty says, but explains that where certainties do exist, insurance risks can be compared using measures such as accessibility, size distribution and fibre size.

“Manufacturers have this information at their fingertips, but insurers have not developed the habit of asking for it. A register of commercial uses of nanomaterials would help,” he adds.

This is bolstered by a lack of claims information – a challenge with any emerging risk, according to Clark. “When you have got something relatively new insurers do not have a wealth of claims information to help them assess severity and frequency or risk – the two main elements that help with pricing,” he says.

“A lot of insurance built around nanotechnology is a bit of a ‘wet finger in the air’ by insurers that are willing to stick their neck out a bit and provide product, environmental or employers’ liability-type coverage,” he explains.

“For obvious reasons it is not particularly attractive for insurers that normally feel more comfortable with actuarial analysis gained over a long period of time.”

Houseago agrees: “The issue is getting to the level of understanding of what the risks might be. There doesn’t seem to be the learning out there. The hard data insurers need to price seems to be a little bit thin at the moment.”

Indeed, obtaining as much hazard information as possible is crucial in enabling insurers to correctly draft policy terms and conditions and exclusions, Clark says. “[However] that is often difficult to do if you have a lot of intellectual property you spend a lot of money investing in and creating. Insurers are going to want to see all the data there is,” he says – which could prove time-consuming.

Specific products
Most commentators considered nanotechnology risks would come under existing policies rather than requiring a specific product, much like cyber risks being covered by general liability.

“Insurers are probably underwriting things whether they mean to or not around the possible effects here, without specifically dealing with nanotechnology as a topic,” says Beattie.

15 percent of all products are predicted to contain nanotechnology by the end of 2014However, specific nanotechnology products do exist. An example in the US market is Lex Nano Shield launched by Lexington Insurance Company – part of AIG – in 2010.

The product provides general, product, product recall and product pollution legal liability cover for companies where the main business is manufacturing nanomaterials.

Sucher agrees with Beattie that a specific product is not necessary. At Allianz Worldwide Care, nanotechnology products fall within general policy terms and conditions.

However, the challenge for Allianz is ensuring the nanomedicals it covers have been approved by the US Food and Drug Administration or the European Medicines Agency. “We rely on their judgement and if any drug becomes licenced by either of these bodies then we will cover it [within our general policy],” she says.

With nanotechnology seemingly covered by general policies, insurers are unlikely to eliminate cover through policy exclusions, Clark and Bruch agree.

“There could be some policies out there that have a nanotechnology exclusion in them but that was an initial reaction in the market for some types of miscellaneous manufacturers’ commercial combined packages. You tend not to see those exclusions anymore,” Clark says. “Insurers would rather understand the risk they are writing than have blanket exclusions in place.”

Bruch adds: “At the moment, there are no reasons to exclude specific areas of nanotechnology from insurance policies. This measure should only ever be adopted by an insurer as a last resort in order to protect the public, insured clients and the insurer from unacceptable risks.”

So, while insurers are most likely covering nanotechnology products already, with the increasing presence of these products it is necessary for firms to stay abreast of the risks and challenges these products may introduce.

As Beattie says: “I would put it into the category of technology that is moving very quickly and providing opportunities for commerce. Insurers need to respond quickly.”

Where you can find nanotechnology

This article was published in the 3 July edition of Post magazine.

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