A new risk every decade: from cyber to drones and self-driving vehicles

The business world is constantly changing and so does the context in which entrepreneurs work. This evolution carries new risks that the insurance world must find appropriate solutions for. If you go back in time, you will soon discover that a new type of insurance comes to light roughly every new decade. And this trend will continue into the future.

A new risk every decade: from cyber to drones and self-driving vehicles

Under the impulse of the flourishing economic climate in the eighties it became clear that companies just kept getting bigger. This involved huge concentrations of capital. It was the very size of these companies, however, that caused them problems when they tried to recover after a major fire. These companies were indeed insured for the material damage they had sustained. But their policies did not take into account the fact that it took time to rebuild the company premises. By the time they had done that and were in a position to restart production, their previous customers had taken their business elsewhere. At that point, it did not take long for the spectre of bankruptcy to loom large.

Vanbreda responded to this problem by introducing an insurance policy against loss of profits alongside traditional fire insurance. This type of insurance served as a life insurance policy for companies, helping them to get through the period following a fire. Although many entrepreneurs were unable to see the value of this straight away, over time it turned out that companies that took out this insurance policy emerged more strongly from unusually severe incidents of this kind.

During the nineties, it was the director’s liability insurance policy that drew people’s attention and brought strong criticism. Directors could use this policy to insure themselves against the consequences of company policy failures. Initial reactions to the policy were lukewarm to say the least. Customers saw it as a policy designed for major multinationals, not as an insurance product that was of any benefit to them.

Yet this period saw fundamental changes to legislation, meaning that there were more and more legal grounds on which a company director could be held liable. As a pioneer in the Belgian market, Vanbreda observed the rise of this new risk. Today, the director’s liability policy has become a standard insurance policy that has proven its added value on numerous occasions.

Dioxin crisis

During the 2000s, it was the dioxin crisis that demonstrated the inadequacy of traditional product liability policies for food companies. At that time, the government stepped in to support these companies and prevent the Belgian food industry from being decimated. But the devastation to the Belgian food sector was enormous.

In the insurance world, Vanbreda responded with a recall and contamination insurance policy. This allowed food companies to insure themselves against the financial damage suffered when products needed to be recalled. One food crisis after another emerged during the years that followed. Fortunately, though, food companies were now able to protect themselves from the consequences of contamination with the help of this policy. In this way, the policy grew to become a standard form of insurance within the sector.

Doubling of cyber policies

Today, we can see that a society without cyber insurance is unimaginable. In 2013, the cyber policy was still a brand new product on the Belgian market, but since then, the number of online processes in the business world has only increased and the risks are no longer up for debate.

In 2016, cyber insurance made its definitive breakthrough. The experts at Vanbreda noticed that in 2016, the number of cyber policies taken out doubled compared to the year before.

In addition, Europe is also placing cyber security high on the agenda with its new privacy legislation (GDPR). Companies that are not in line with the new privacy legislation risk considerable fines. Today, administrative fines – along with all costs associated with the obligation of notification – can be insured in a cyber policy.

Drones and self-driving cars dominate the future

And what does the future hold? It is highly likely that by 2020, insurance for drones will be a standard policy. The figures on the rising popularity of drones speak for themselves. Today in the United States it is estimated that 600,000 drones are being used for commercial or professional purposes. In the Netherlands, we have 150,000 drones and more and more companies are using them.

The use of drones, however, does not only lead to more opportunities. It is also unavoidably linked to more accidents. Today, the cover for drones is often incorporated into the personal liability policy, but it has now already certain that specific policies for drones will be underwritten soon.

When we gaze into the crystal ball a little deeper, we see that by 2030, insurance policies for robotics and self-driving cars will emerge. According to some trend watchers, self-driving cars will conquer the commercial market even sooner. And that will have an enormous impact on the insurance world: because once the computer takes over the steering wheel, the driver is no longer liable during an accident; the manufacturer of the car is.

One thing is certain: the future will bring plenty of changes that will force the insurance sector to stay sharp and alert. We will continue to follow the trends and consider all the appropriate solutions to address the risks of tomorrow.

Gerrit Mets
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