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Whether it’s robot assistants helping grocery stores watch out for spills, robots that allow surgeons to perform procedures with greater precision or a fleet of robotic snakes and insects that can inspect airplanes, robotic technology is constantly advancing, making for a rapidly shifting risk landscape, experts say.
As the use of robotics in industrial and other settings grows, the potential for robotic-related claims involving bodily injury, property damage and financial loss rises, though industry experts say they haven’t seen an increase in claims to date. However, these claims have the potential to be complex as insurers try to determine the cause of a robot-related accident, whether it arises from the manufacturer or the company implementing the technology.
The global robotics industry is expected to grow from an estimated $52.7 billion in worldwide revenues in 2018 to $500 billion in revenues in 2025, according to Boulder, Colorado-based market intelligence firm Tractica.
In many ways, this is “a golden age” where “companies are looking to implement robotics to streamline their operations and workforces, and to supplement human workers and to remove hazards,” said Morgan Kyte, New York-based national communication, media and technology casualty placement leader at Marsh LLC.
Because robots are becoming increasingly sophisticated, in some cases acquiring artificial intelligence capabilities, this will add to the complexity of claims, experts say.
The courts are going to have to grapple with these liability issues, particularly with respect to artificial intelligence, said Natalie Pierce, San Francisco-based co-chair of the robotics artificial intelligence and automation industry practice group at employment law firm Littler Mendelson.
“When AI systems are increasingly using their own self-learning rather than preprogrammed instructions, the courts are going to have to grapple with a lot of issues around ensuring accuracy, legality and fairness of AI decisions,” said Ms. Pierce.
But just because the risk landscape is changing, it doesn’t mean that losses are increasing, said Jens Alkemper, Norwood, Massachusetts-based research area director for insurer FM Global. “When I look through our loss history, I don’t see a particular spike in losses related to robotics.
It’s not that the loss history is causing us to worry that much,” Mr. Alkemper said.
“That said, the risk is changing, and that means we have to pay careful attention to what is happening here,” he added.
For example, as a growing number of manufacturers and warehouses automate their processes and systems, FM Global is looking closely at the robotics-related property risks that can arise.
Risk managers must understand their companies’ dependence on robots and manage their risks, including by properly inspecting and maintaining robots just as they would any other piece of machinery, he said.
“As we introduce robotics in different settings, we have to understand our exposure to these robots. Robots can break, robots can cause other things to be affected. One of the worst-case scenarios is a robot can cause a fire and that can spread,” said Mr. Alkemper.
Cybersecurity is also an important consideration for risk managers, industry experts say.
Cyber risks arise from the basic operation of industrial robots because they are connected devices operated remotely, and also arise from the manufacturers of robots, especially if they are monitoring the robots remotely, said Michael Stankard, industrial and materials practice leader for Aon PLC in Detroit.
“Data could get stolen,” he said. “Valuable production data could get intercepted through the connectivity of the robotics and the analysts using the information.” Cyber coverage is provided within FM Global’s all-risk policy, so if a cyberattack targeted a robot and caused damage to an insured’s essential business equipment and business interruption, the loss would be covered, a spokesman at FM Global said.
American International Group Inc. has offered coverage for businesses making or operating robots since 2016. The New York-based insurer’s coverage provides robotics errors and omissions coverage, general liability and products liability insurance and specialized risk management services, albeit on separate policies, said Jeanmarie Giordano, New York-based global head of professional liability, financial lines at AIG.
Current buyers of AIG’s robotics E&O coverage are software and technology product developers, mainly existing technology E&O clients, whose business is evolving into the AI space, Ms. Giordano said. “We sell products to companies in the (tech) space who have a track record and produce revenue off it,” she added.
The automobile industry has traditionally accounted for the lion’s share of North American robotics technology purchases, but interest is now growing across other sectors such as life sciences, food and consumer goods, plastics and rubber and electronics.
A total of 28,158 robots valued at $1.4 billion were shipped to North American companies in the first nine months of 2018, up 9% by number of units, the Ann Arbor, Michigan-based Robotics Industry Association reported in November 2018.
In the next year to 18 months, as the use of robotics becomes more widespread, AIG expects takeup of the E&O coverage to grow, especially as startup companies currently still in the research and development phase go to market, Ms. Giordano said. The insurer can offer total capacity of $75 million on the E&O side, but typically provides up to $10 million in any given layer.
From the perspective of the manufacturers of robots, there is ample coverage available and insurers are “more than happy” to write the risk, Marsh’s Mr. Kyte said.
Essential coverages for manufacturers of robotics technology include an E&O policy to cover financial losses arising from failure of the product, and a general liability policy to cover losses if a robot-related accident occurs causing property damage or bodily injury, and a cyber liability policy to cover cyberattack and hacking threats, Mr. Kyte said.
Having a single product available for robotics manufacturers would ensure there were no gaps in coverage if a claim occurs, Mr. Kyte said.
“The policies need to work in sync, but there are not a ton of carriers out there that have policies that are well synced,” he said.
Insurers are experiencing a two-fold impact from climate change as both underwriters and investors, and some insurers, are investing in environmentally and socially responsible projects that also mitigate the risk of significant insurance payouts from future catastrophes.