Innovative technologies can be transformational for businesses, industries and our way of life, but they also represent risks. Advances in new areas of tech, such as artificial intelligence (AI), are creating unforeseen threats that insurers must grapple with or risk new exposures. However, three emerging risks rise above the rest as issues the insurance industry should monitor closely.
Generative AI: A New Day Dawns … for Cyber Risk
Barely a day seems to go by without a story heralding a new milestone for Generative AI — the machine learning technique that can create original content such as images, text, video and computer code, from simple text prompts.
In January 2023 alone, we learned that Generative AI has been used to design homes, act as a defense attorney, and imitate human voices. Market researchers see Generative AI apps, such as OpenAI’s popular ChatGPT, creating plenty of revenue — potentially $109 billion by 2030. But the same creative power that has captivated our attention has also raised potential concerns.
Generative AI’s capacity to both mimic real-life people and have seemingly human interactions may be among the most pressing concerns for insurers. It’s taking the concept of a “deep fake”– an artificial likeness of an actual person — and giving it the added realism of interactivity. Today, many cybercriminals are often able to perpetrate fraud and phishing scams on a seemingly industrial scale using text and email. With Generative AI, it may be possible to generate video calls with deep fake imposters or possibly audio calls with an AI that sound identical to a living person. Those capabilities heighten the threat of criminals potentially gaining access to company or individual data and committing fraud or data breaches.
We may only have scratched the surface of Generative AI’s capabilities, but already it appears that the potential for cyber mischief could be profound. Insurers and regulators are sure to keep an eye on this technology as its usage and capabilities expand.
Dark Patterns: FTC Shines Light on Deceptive Designs
If you’ve ever inadvertently clicked on a digital ad, found yourself hurrying to purchase an item before a countdown timer expires or spent countless minutes trying to cancel an account that took seconds to create, you may have been a victim of a dark pattern.
A dark pattern is generally a design practice that attempts to trick or manipulate people into a choice they likely wouldn’t otherwise make. While dark patterns existed before the internet, the digital era has led to renewed concern about the practice as it’s become easier to build, test and deploy manipulative designs at scale.
Regulators have taken notice — and action. In October 2021, the Federal Trade Commission (FTC) warned that it was ramping up enforcement against companies that resort to dark patterns. In December, they made good on the warning, announcing a $245 million action against a popular videogame maker. Several states are also explicitly referencing dark patterns in enacting privacy legislation, particularly as it pertains to obtaining consumer consent.
Insurers should take notice of these recent regulatory trends to ensure their own design practices don’t violate legislation, as well as keep an eye on potential exposure from any insureds using these design patterns.
Bidirectional EVs: Are Portable Power Plants Worth the Risk?
Most electric vehicles (EVs) today are sold with unidirectional charging — they receive alternating current from a charging source and convert it to direct current to charge the batteries that power and propel the vehicle.
But an emerging class of EVs and charging stations now support bidirectional charging. They’re equipped with inverters that transform the direct current used in their batteries to the alternating current needed for appliances, homes and even the electrical grid.
Bidirectional charging can essentially transform EVs into mini power plants.
While it’s not yet a mainstream feature, there are several tests underway involving vehicle-to-grid charging.
But while providing emergency backup power or a clean source of reserve power for an overstretched electric grid can provide obvious benefits, the incorporation of bidirectional charging functionality into EVs raises a number of as-yet-unanswered questions, such as:
- Will bidirectional charging impact battery performance?
- What are the fire risks associated with bidirectional charging applications?
- Could a hacked EV possibly become a vector for malware targeting homes or even the grid?
The answers to these questions should be of great interest to insurers, especially with the growing popularity of electric vehicles and the subsequent rise of automotive cybersecurity incidents.
As these risks evolve, they are sure to have an impact on the industry, potentially increasing exposure. Keeping track of these issues will be critical to strategic planning and risk management as we journey into the future.
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