Special Report: Insurance Experts Talk Tech Risks at USC

Richard Breen

Monday, October 30th, 2017

Stealing your car by remote control in the dark of night. Eavesdropping on your conversations while lifting credit card data from your Amazon Echo. Hacking into an Internet-connected pacemaker and shutting it off.

With Halloween less than a day away, it sounds like the plot to the latest scary movie. Instead, it was just a sample of the topics – not all of them scary – covered by expert panels Wednesday during Risk Management and Insurance Day at the University of South Carolina. Along with wide-ranging discussions, the event included a keynote address from Raymond Farmer, director of the S.C. Department of Insurance.

His remarks included hopes that driverless vehicles will someday make South Carolina roads safer. Farmer pointed out that the Palmetto State leads the nation in traffic fatalities per 100,000 miles driven, according to the latest data from the Insurance Institute for Highway Safety.

“We need to be safer drivers,” Farmer said. “When you’re in the car, please drive. Put down the phone and drive the car.”

But he also asked when it comes to autonomous cars, “what happens when somebody hacks that vehicle?”

David Zuby, chief research officer with IIHS, pointed out that hackers could potentially access anything from anti-lock brakes to keyless entry systems. Adding wireless capability to vehicles, he said, “just increases the risk exposure.”

Autonomous vehicles could impact insurance in that liability will now shift from the driver (since there won’t be one) to the manufacturer. And those vehicles will be stuffed with even more technology than they are now.

“We’re likely to see safer vehicles that when they do crash, create larger costs for insurers,” said Bryant Walker Smith, an assistant professor of law at USC.

Adam Kopcio, vice president with Sompo International Insurance, expressed concern about items that are part of the Internet of Things becoming outdated. What happens when Amazon stops providing technical support for an early-generation Echo, but the customer keeps using it anyway? What happens when someone with a remote-programmable pacemaker isn’t vigilant about updates?

“I don’t know that the technology is being supported to the extent it needs to be,” Kopcio said.

Among other discussion topics:

Affordable Care Act – South Carolina has had five different insurers providing Obamacare policies at various times, but is now down to only one. “It seemed like (ACA) was doomed to fail from the start,” said state Sen. Ronnie Cromer, R-Newberry, chairman of the Banking and Insurance Committee.

National Flood Insurance Program – “It’s not an insurance program, it’s a social program,” said Smitty Harrison, executive director of the S.C. Wind and Hail Underwriting Association. “I think we just need to stop promoting risky behavior. There are some places where you just shouldn’t build.”

Federal tax reform – Frank Sheppard, president of the Insurance Agents and Brokers Association of South Carolina, believes it’s something insurance agents should be paying attention to. “Independent agents are small businesses,” he said. “They’re taxed at individual rates.”

The event brought together more than 70 insurance professionals, regulators, elected officials and members of the university community. Organizer Robert Hartwig, clinical associate professor of finance and co-director of the Center for Risk and Uncertainty Management at USC, said he wanted to show that the insurance industry is vital to South Carolina.

“The goal was to showcase the risk management and insurance major,” Hartwig said.

There are more than 400 USC students either majoring or minoring in insurance, school officials say, making the program the fourth largest in the nation.