Powerful 5G smart tech devices are expected to be rolled out this year. They are anticipated to overtake 4G in terms of reliability and innovation, as well as increasing data speeds, resulting in faster downloads and increased capability for digital services
While initial coverage is expected to be patchy, and availability limited, all 5th generation technologies will streamline the internet of things for consumers, so insurers need to be switched on to its risks and opportunities.
One area of cover on which this speeded up connectivity could have a powerful impact is motor insurance, although Adam Miller, group head of IT at Markerstudy, fleetingly touched the brakes to calm acceleration of what he called “a 5G hype cycle”. Commenting that 5G would be more susceptible to interference, he observes that its connection would ultimately make contact with the BT backbone to which many mobile masts are connected, asking whether it would, therefore, only be as quick as the slowest link.
More data, more quickly
Such questions notwithstanding, Miller remarks that if the sorts of speeds being talked about do materialise, 5G will allow collection of more data, more quickly. “When you combine this with connected cars becoming more common, that creates enhanced opportunities to collect data on vehicle condition, driving habits, frequency, and accident data directly from the vehicle and earlier. This could help risk profiling with a wider range of potential enrichment data,” he adds.
It’s certainly an exciting time for vehicle insurance, with motoring technology quickly picking up speed, opening up new ways of underwriting. Gerry Ross, head of motor at Allianz, explains that 5G will enhance the information drivers receive on the move, and connectivity can improve road safety. But it’s not just a question of technology, there are even bigger questions about infrastructure, data ownership and – important to note – that while an intelligent or connected vehicle will be using 5G, for it to be truly autonomous it will not be relying on it, Ross adds.
This technology is head-turning in its potential to make driving safer, leading to fewer accidents, and reduced premiums. Connected cars leveraging 5G networks will be able to share hazards ahead, or severe event warnings in real time, with nearby drivers, comments Richard Jelbert, CEO of Inzura, who adds: “It essentially allows drivers to see around corners, reducing the likelihood of an accident and claim, and connected cars with 5G networks will be able to share hazard or severe event warnings in real-time.”
And it’s not just the actual driving, because 5G will also improve customer service, by improving the quality of video calls and help desks, according to Jelbert, who adds: “This could allow insurers to offer a video claims service where the loss adjuster requests certain scenes relating to the claim. This is being trialled already with 4G but 5G allows for better quality video so the images can be stored and referred to at a later stage.” He says insurers should offer preferential rates for these types of advanced safety services in the future.
There is no doubt that 5G being rolled out across the networks will help autonomous vehicles, which will be able to talk to each other, as well as to the infrastructure. Mark Stamper, group managing director at Camera Telematics, observes that as long as the volume of data is in usable, easily managed form and – if presented well to insurers – could help manage, and reduce the risk of the insured.
A key question arising from this evolving technology, and highlighted by Stamper, will be where potential liability rests: with the manufacturer, the telematics software supplier, or be passed on to the policyholder? According to Rachel Moore, a partner at Kennedys, risk could ultimately be transferred to manufacturers, because accidents might stem from malfunctioning systems, forcing the producers to insure fleets of cars instead of individual drivers insuring themselves. This shift from motor to product liability insurance will have the greatest impact on motor insurance, she observes, and the risk profile switch from the driver to the vehicle means premiums will instead reflect software levels in the vehicle.
As 5G unleashes the ability for vehicles to interact with each other, as well as with infrastructure, and devices, networks and even pedestrians in real-time, it presents an opportunity for insurers to contain underwriting losses and take on a more proactive role in preventing accidents and minimising losses, according to Jarno Seegers, associate vice-president business development of Xceedance, who adds: “Telematics data gathered by sensors embedded in the vehicles will be transmitted over the 5G network with negligible lag, allowing carriers to analyse it and actively shape driving behaviour.”
And it’s not just cars, it will also have a big impact in our homes, and in businesses. Helen Idle, head of household claims at Axa, says the faster mobile connectivity brought by 5G would be helpful as insurers are rolling out digital technologies to simplify the claims process. Axa is already using video links so, for example, an escape of water claimant can show handlers the damage caused to their home. “It makes their life easier and we can pay out more quickly. We are expanding into commercial lines and across more types of claims [and] while many people prefer to use wifi for video calls, if 5G becomes widely available and affordable, the fast mobile connectivity will open up many possibilities for claims applications,” she adds.
Some insurers are already rewarding home owners with discounts if they adopt ‘smart’ housing and make the sensor data available. That translates into containing risk with IoT data, observes Seegers.
With growing expectations of, and demands on, healthcare providers, the fifth generation network has already become a catalyst for the use of healthcare IoT devices and tele-health services, and the UK health and social care sector is already starting to rely on these technologies to help manage long-term illness at home. Tim Boyce, who heads the healthcare team at CFC Underwriting, cites the example of one healthcare authority in the North, which uses a live video link to a qualified pharmacist to help people take medication safely at home; as well as sensors that monitor falls and a digital loneliness device which connects people to chat with others at the push of a button.
In more acute medical conditions in a hospital setting, 5G-supported machine devices are starting to revolutionise surgical procedures via remote robotic surgery, says Boyce, adding: “These applications all rely on 5G’s durability, speed and increased data transfer to provide a consistent service for patients.”
Other ways in which 5G could transform the healthcare industry, according to Seegers, include increased IoT applications, such as monitoring health and diet: “The next generation of wearables would be enabled by 5G to transmit patients’ vital details to a care provider quickly, making real-time care possible. That will also support the paradigm shift from reactive and acute to proactive and preventative care,” he observes, adding that 5G will further enhance remote care – such as from 5G enabled ambulances – with virtual consultations in situations in which delay in care delivery or latency in data transmission could mean life or death, or severe damage.
While all these innovations might enhance certain aspects of care, they also have a hint of ‘big brother’ about them, so what could be the impact of 5G on privacy and personal data? Shannan Fort, cyber insurance leader at Aon’s Global Broking Centre, says because one of the implications of 5G technology is the ability to connect more devices, information personal and private – will likely need to be shared across a broader network of systems, devices, and with people.
He continues: “Accessibility and the speed at which data will be available could also have a troubling impact on maintaining privacy. As this technology will underpin many connected devices, and as more of these are used in various facets of our lives, the amount of data they will collect and analyse for more personalised experiences – from gaming, shopping and driving to household appliances – will create new genres of sensitive and confidential information. Imagine the profile of an individual that can be built from data on shopping habits, dressing and laundry habits as well as sleeping patterns – all collected through household appliances.”
On the liability front, most hazards associated with 5G already exist to some extent with 4G, comments Stuart Toal, casualty account manager at Allianz, but as everything becomes more connected the greater potential for a domino effect exists if something goes wrong with the new technology: “Issues such as product failure, may result in serious injury or damage where [it] reduces human decision-making. The cover needs to be well defined, although liability policies will still require the policyholder to be negligent for a claim to progress.”
Both 5G and the increased use of electronic devices are predicted to increase exposure to electromagnetic fields, Karishma Paroha, senior associate at Kennedys, says any negative impact on health affecting product liability insurance claims would depend on whether a causal link was established between any exposure and the use of such devices. “Causation would be complex, given that exposure could potentially result from the accumulative usage of multiple electronic and smart devices at home, work, in autonomous vehicles, and from the environment itself. While a rise in toxic tort litigation in the long term is a risk, this might be attributed to numerous potential backdrops, such as product liability, nuisance and pollution.”
This is clearly going to be a tricky area of potential risk to navigate, and Adam Grossman, vice-president, and senior scientist at Praedicat, highlights the divergence of views among scientists on whether there is any potentially adverse health impact from the levels of radio-frequency radiation to which people are exposed – from any source. But he notes that when it comes to 5G’s impact on product liability insurance, this has not avoided an uptick in personal injury litigation in the US, which can result in large ‘duty-to-defend’ risks for insurers, even if the lawsuits fail. He comments: “Carriers can manage this risk by employing forward-looking analytics and risk models alongside underwriting strategies to manage accumulations”.
There could also be implications when it comes to catastrophe insurance, in that parametric contracts [which don’t fully indemnify] can enable insurers to settle claims automatically once a threshold on an environmental parameter has been crossed, Seegers observes adding: “For instance, a sensor monitoring moisture in the soil at a farm might detect a drought-like situation, leading to crop failure and allow the farmer to receive a pre-determined sum in compensation.”
Spotting the opportunities
As 5G matures and coverage improves, the question arises of whether insurers will be quick to spot the opportunities this presents? “The insurance industry over-slept the upcoming of computers, the internet, social media and mobile internet. Most will also ignore the 5G revolution,” says Dr. Robin Kiera, an insurtech influencer. However, he points out, there are several new players in the market – such as insurtech, tech companies, re-insurers and fast-moving direct insurers – so individual organisations might take advantage of it.
Manufacturers taking on the insurance of vehicles would help remove insurer resistance as a barrier to the sales of more cars, according to Seegers, who points out that such an eventuality could further tighten the market.
Meanwhile, insurers will be keeping a watching brief on a development which would certainly have an impact on risk, and how it is calculated, as well as on greater efficiency. But while the race for faster connectivity is on, it has yet to be won. Meanwhile, potential cyber issues caused by the increased 5G bandwidth permitting faster exfiltration of data than before has been flagged up by Swiss Re’s Sonar report.
There would also be more exposure from a privacy perspective, which prompts Seegers to hope regulators would enforce strict security protocols, but to fear this might already be a lost battle.
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We’ve set out more detail on our proposed court action on business interruption insurance.— Financial Conduct Authority (@TheFCA) June 1, 2020
This includes identifying the representative sample of policy wordings & those insurers we've invited, & have agreed, to participate.https://t.co/f53WiCjhMV #coronavirusuk #FCAupdate pic.twitter.com/QS2xkVPp5V
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