Insurance Edge Editor Alastair Walker, grabbed a brew and had a ten minute chat with Richard Houseago, Head of Property Risk and Coverage, at Keoghs law firm.
IE: Home insurance is changing, with data from a variety of sources underpinning much of the risk in modern homes, but I have to admit, I’m holding out on the Alexa thing, in case it’s an I Robot scenario and it decides to take over.
RH: Unlikely to happen, but there is a smart tech risk that’s growing as we put more integrated systems into new buildings. It probably isn’t going to be a problem for many traditional home owners, but in bigger cities where say people often live in apartment blocks, with a secure entry system, on-site gym, shops maybe, various lifts, temperature control, fire system monitoring etc there are potential scenarios which many insurers and brokers haven’t really spotted yet.
IE: OK, give us a `let’s say’ example please;
RH: Say a malicious actor decided to take control of a modern apartment complex. They may be able to hack into the control systems for the elevators and stop them, perhaps cut the main power supply, leaving just emergency lighting – even control the water pumping system that sends the supply to all the floors and apartments. If you’re talking about High Net Worth individuals living in say London, then there is perhaps a blackmail, or ransomware type of risk to consider.
IE: Yes, I can see that in an age of internet enabled devices, from Cortana to smartwatches, home-based CCTV systems to fridges that order food stocks tjemselves, there is the possibility that someone could effectively shutdown your everyday life by cutting wifi, electricity and water in quick succession. Kinda like Die Hard in slo-motion?
RH: Sort of, yes, because modern Building Management Systems do control a wide range of functions, in both residential and commercial blocks, and there is an increasing vulnerability via the Internet of Things. One thing insurers need to look at carefully when offering cover is the security of that remote management system, can it be hacked?
Although there’s an obvious burglary risk if an alarm is disabled, when you think about it, switching off a building alarm system remotely isn’t as inconvenient as stopping the water supply for the whole building. That creates a variety of serious problems very quickly indeed, perhaps even resident evacuation and re-housing them temporarily – expensive in London or other major cities.
In theory, you could overload a building’s electrical system, with extremely serious consequences. OK, these things have not happened – yet. But underwriting and insurance is all about assessing risks and calculating how much a worse case scenario might cost.
The situation is similar to driverless cars in many ways; it is ultimately about control, and failsafe systems that people can have confidence in. An apartment block is just as vulnerable to cyber attack as a driverless truck, but the public perception of the risk is different, more benign.
IE: How do you think the insurance industry can monitor the evolving risks as regard buildings then?
RH: When quoting brokers and MGAs need to consider every eventuality, not just the existing, or historical risks like fire, flood and so on. There are new ways to cause damage, both deliberately and by accident, but the bottom line is that the insurer needs to cost out the repair bill if an electrical supply is cut off, or the tenants in a penthouse block overlooking the Thames wake up to find they have no water supply, or cannot leave the upper floors except via the stairwell, as the lifts have been hacked and brought to a standstill.
IE: Food for thought Richard, thank you.