Let’s Talk: Urs Uhlmann on climate change, big data and the evolving challenges of cyber risks
The interconnectedness of technology with our lives and businesses has surfaced both new capabilities and new risks. We spoke with Urs Uhlmann, AXA XL’s Country Manager for Canada, to hear his views on how the insurance industry is harnessing some of these new capabilities to help clients more effectively predict and mitigate different categories of risk.
A significant number of natural disasters caused property losses in Canada during 2018, including fires, floods and tornados. What do you see as the ramifications of these events for Canadian companies and the commercial insurance industry?
Uhlmann: Canada, like the rest of the world, has been subjected to more unusual and extreme natural disasters influenced by climate change. These have created numerous challenges for our clients as well as for us as their insurance partner – not to mention the considerable hardships many Canadians have experienced. Our first obligation, of course, is to support our clients in responding to and recovering from these events, and I’m proud of how well our team has performed under some very tough circumstances.
At the same time, we have to assume that this trend is not an aberration; events that previously were unusual and extreme are fast becoming more commonplace. That has two broad implications.
First, as the losses from natural hazards continue to mount, simply taking out an annual indemnity policy and relying on an insurer to step in after a natural catastrophe is becoming a less viable stance for most Canadian companies. In my view, it’s even more critical for commercial clients to proactively assess how a changing risk landscape could affect their operations, and to work with their insurers and brokers to implement practical and cost-effective programs for managing and mitigating their exposures to natural disasters. Many Canadian companies have been moving in this direction for years now, and we welcome the opportunity to partner with them as they strive to address the risks posed by a changing climate; that includes pre-event planning and preparation aimed at minimizing the damages and enabling a fast and effective recovery.
" ...data is the foundation of the insurance industry, and we are always seeking out both new data as well as new ways of translating data into information and insight.
Second, commercial P&C re/insurers, like AXA XL, need to continue to learn from each event. In our case, that includes constantly updating and refining our computer models to develop a more complete picture of where and how our clients are exposed to natural hazards – especially floods, tornados and wildfires – as well as the expected consequences under different scenarios. These efforts to better quantify the potential impacts of specific natural perils are benefiting considerably from new data sources, including feeds from the latest generation of high-resolution weather satellites, as well as increasingly powerful computers that can simulate natural systems with even greater precision and granularity.
It also means continually assessing our own operational performance in supporting clients both before and after events leading to substantial losses. Because Canada is so spread out, it’s not always easy for a commercial insurer to dispatch a large team of loss adjusters to a disaster location to make sure claims are assessed and resolved quickly, efficiently and, most importantly, fairly. That’s why we’re actively exploring how new technologies like, for example, drones can be deployed to help us assess a client’s site and mobilize an efficient and effective recovery effort. Advances in mobile autonomy – think robots with wheels – are also making it possible to survey disaster areas that are otherwise inaccessible or too dangerous for humans. That’s an area where AXA XL benefits from its partnership with the UK firm Oxbotica; it’s one of the world’s leading developers of mobile autonomy applications.
How can Canadian companies use the immense amounts of data collected from IoT devices and other sources, such as telematics, to both predict and manage risk?
Well, data is the foundation of the insurance industry, and we are always seeking out both new data as well as new ways of translating data into information and insight. As I mentioned, AXA XL is taking advantage of a profusion of data from a vastly greater number and variety of sources to refine its natural hazard models. That’s just one of the many ways we’re capitalizing on the big data phenomenon.
Although it’s still early days, connected objects are poised to play an essential role in the construction industry – that’s an important sector for us – in enhancing safety and reducing risks. One way that is starting to happen is with “smart wearables” like safety vests and hard hats that can, for instance, detect falls or monitor workers’ body temperatures and heart rates. And as more and more data are captured by these devices, construction companies, with support from their insurers, should be able to spot patterns and trends that will help them create safer work environments.
We’re also starting to see sensors being embedded in concrete during the pouring process; these can relay data on the quality and integrity of the concrete as it cures. They also become a permanent part of the structure and can alert the building owner if subsidence or other issues threaten the stability of the building.
Although the benefits of vehicle telematics have been touted for years, they have not yet become as commonplace as many observers expected. Nonetheless, as with most new technologies, the costs are decreasing while the capabilities of the devices and ancillary systems are increasing.
However, I think a big challenge – and the reason some Canadian companies have been reluctant to implement telematics solutions – is that capturing data on driver behavior is just a starting point; it’s a means to an end. That is, for commercial clients to profit from vehicle telematics, they also must have the capabilities, for example, to identify which individual drivers regularly engage in certain risky behaviors and have training modules on the specific issues a particular driver needs to address. For many non-transport companies that operate a lot of vehicles – think corporate salespeople, construction companies, or utility and building trades workers – developing these capabilities has sometimes proved to be difficult. (For transport companies, driver screening, training and monitoring are usually well-established competencies, and many of these firms already are using sophisticated telematics systems to manage their vehicle fleets.)
Nonetheless, as more and more companies embrace this technology, I expect to see greater convergence between the telematics solutions and insurance product design. In fact, I see this as the next big frontier in the commercial insurance space. We have the ability to change an insurance product that has been around for years to become more precise and relevant to individual risks.
Cyber risk remains a top concern in Canada, especially in relation to business interruption and property damage. What does the industry need to do to solve this challenge?
We are really at the beginning of addressing the cybersecurity challenge. And honestly, I am not sure if we are ever going to “solve” cybersecurity; trying to contain cyber risks sometimes feels akin to trying to “stab mercury.” The risks and issues of cybersecurity change rapidly, as does the technology to help mitigate them.
Most cyber-attackers are motivated by money. Whether via ransomware, phishing or data theft, these cyber-criminals aim to extract money from the victims directly or to capitalize on the sale of their data in underground marketplaces. These represent about half of all cyber-attacks.
A smaller but still noteworthy proportion – around 40 percent of cyber-criminals – are motivated by the extraction of information. In these cases, the attacker’s objective is to hack a company’s systems to gain access to IP or competitive intelligence, or to blackmail the company.
Then there is the smaller group of cyber-criminals whose motives are sometimes characterized as “FIGs”; that’s short for “fun, ideology and grudges.”
Whatever the motivations, insurers need to gain a lot more clarity around the issues – especially cyber-criminals’ tools and methods plus the organizations they are targeting – and continue to keep up with developments in the space. Confronting the evolving challenges associated with cyber-attacks is much more than just assuming risks of our insured; it includes helping them understand — and especially mitigate — the risks through early warning systems.
One of the greatest difficulties for Canadian businesses today is that while there are significant players in the cybersecurity market in both Europe and the United States, there are not a lot of choices for these businesses in terms of insurers for cyber risk. Moreover, there currently are significant differences between what is covered by different carriers. At AXA XL, we’re partnering with some of the most capable and innovative cyber consultants in the industry to help educate us as well as our clients, and who can step in right away in the event of a breach or cyber challenge. When it comes to cyber risk, having the best people and resources on speed dial during a time of crisis is paramount!
Urs Uhlmann is CEO and Country Manager for Canada, where he leads the regional business strategy and overall insurance operations at AXA XL. Urs has extensive experience in commercial insurance and risk management for corporate customers operating in Canada. Before joining XL Catlin in 2018, he served as CEO, Global Corporate, for another global insurance company and held various executive roles in commercial markets strategy. He is based in Toronto, overseeing offices in Montreal, Calgary and Vancouver, and can be reached at email@example.com.