Is InsurTech the future of Insurance

Daniel
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Is InsurTech the future of Insurance

The technological revolution that has been disrupting finance is about to come to insurance with potentially dramatic results. A new generation of innovators is poised to apply Fintech solutions such as peer-to-peer transactions to insurance; in what might be called the InsurTech revolution.

The most revolutionary concept is peer-to-peer insurance; which utilizes the techniques of peer to peer lending. A peer-to-peer lender like Lending Club does not underwrite loans; instead it puts the loans on a platform. Investors review the loans and underwrite them as an investment.

A German company called Friendsurance has created a platform which allows policyholders to insure each other through small pools. The members of each pool underwrite each other’s policies with their premiums. If a claim exceeds the pooled funds, reinsurance makes up the difference.

The big advantage to this is that it allows private individuals to take advantage of the reinsurance market. The pools can tap the syndicates operated through companies; like Lloyds of London, for reinsurance in the same way that big business traditionally has.

One way this would work is to allow customized insurance for people with a similar level of risk, such as the young or persons that work in a particular field such as medicine. That makes it easier to reinsure the pools through the market.

Friendsurance aims to attract customers by paying cashback at the end of the year. if no claims are paid. The idea behind that strategy; which is used by some American insurers like Allstate, is to attract low-risk customers by rewarding them.

Friendsurance’s business model seems to be limited because only a few kinds of coverage are offered through its platform. Currently only home contents (homeowner’s or renters’ insurance in the United States), private liability and legal expenses policies are offered. The company seems to be avoiding some of the more complex areas of insurance; such as auto and business coverage, which indicates the limitations of its technology.

Behaviour based Insurance

A company that aims to overcome those limitations is the American start up Lemonade. Lemonade hopes to mitigate the inherent risks of peer to peer insurance with a behaviour-based business model.

The company has hired Dan Ariely; a professor of psychology and behavioural economics at Duke University, as its “Chief Behavioural Officer,” The Insurance Journal reported. Ariely’s job is to devise methodology that will identify dishonesty, fraud and other behaviours that increase risks.

Ariely thinks insurance can be reengineered to reward less-risky behaviour. The idea is hardly a new one, many insurers offer lower rates to customers that take fewer risks. Lemonade’s president; Shai Wininger, wants to take that concept to the next level by creating insurance policies that reward good behaviour.

Wininger did not say how this would be accomplished but hinted that Lemonade has proprietary InsurTech designed to achieve that goal. The technology might be rooted in Ariely’s belief that irrationality is predictable.

Dishonesty is a major threat in peer-to-peer insurance because policyholders might lie to cover up risky behaviour. Wininger and Ariely seem to believe they have technology; perhaps a computer algorithm, that can identify signs of risky behaviour and write policies accordingly.

The technology must be impressive because Lemonade has raised $13 million (€9.91 million) from investors, Insurance Journal reported. The company has lined up some respectable reinsurance partners; including Warren Buffett’s Berkshire Hathaway and some Lloyds of London syndicates.

Lemonade has also attracted some experienced leadership. Its current management team includes Ty Sagalow; a 25-year veteran of AIG, as Chief Insurance Officer. Fellow AIG executive Ron Topping and Robert Giurlando and James Hageman from ACE Insurance have joined the company in undisclosed roles.

It is not clear if Lemonade technology works yet because its website is currently under construction. News articles did not indicate if Lemonade has tested its solutions, or when its policies might be rolled out.

Google Abandoned InsurTech

The inherent limitations of InsurTech were demonstrated in March when Alphabet, pulled out of the field. The search engine giant shut down its insurance marketplace; Google Compare on March 23, Market Mad House reported.

The solution allowed shoppers to compare policies, credit cards and mortgages. Alphabet pulled the plug on Google Compare because it was not making any money off the policies it was selling.

The marketplace was unprofitable; because Google was unable to navigate the complex web of insurance regulations that exists in the United States. In America; each of the 50 states, has its own set of rules for insurance. Some states mandate completely different models of common types of coverage such as auto insurance.

That makes it difficult to write basic policies that can be easily offered through an online marketplace. Alphabet also shut down Google Compare in the United Kingdom, possibly because the business model did not work in larger markets like the United States or the European Union.

Another problem Alphabet was apparently unable to overcome was the inability to identify risk factors online. The technologists behind Lemonade think they have overcome that deficiency even though they offer no proof of their claims.

A major problem that Lemonade faces is convincing regulators to approve its products. That will be tough because some American states such as Michigan mandate so-called no-fault auto insurance; in which risk is shared by all drivers. Under that system, Lemonade’s behaviour-based business model might be illegal.

InsurTech revolution might be years away

The inability of such a well-financed and technologically adept company as Alphabet to operate profitability in InsurTech shows how limited present solutions are. It will take a completely different business model and years of trial and error to get peer-to-peer insurance to work.

Despite all the money and resources being invested in InsurTech; a workable peer-to-peer insurance platform is probably a decade away. Large scale disruption of the insurance market by InsurTech is not possible, without major improvements in the technology.

A true InsurTech revolution will take major investment; a strong commitment by large insurers, and new technological solutions. All of those developments are just beginning, meaning InsurTech is not yet a threat to the traditional insurance industry.

Allianz, Nephila announced successful pilot on blockchain catastrophe risk trading

Israel
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Allianz, Nephila announced successful pilot on blockchain catastrophe risk trading

Insurance giant subsidiary, Allianz Risk Transfer AG (ART) and Nephila Capital, the world’s largest reinsurance risk investors, reportedly have managed to use blockchain-based smart contracts to conduct a natural catastrophe swap in a pilot test, indicating that processing and settlement can be significantly fast-tracked and simplified between insurers using blockchain technology.

Catastrophe swaps or “cat swaps” and bonds transfer a specific set of risks, including natural disaster risks like hurricanes or typhoons, from one insurer to other insurers or investors.

These are instruments traded in the market which allow insurers to avoid potential losses. In a cat swap, the insurer pays a third party to assume the financial risk of a defined major natural disaster in exchange of a payment or series of payments.

In a statement released by Allianz, automating the time process for payment transactions between insurers and investors can now be reduced to as low as a few hours from weeks or months after a disaster, thanks to smart contract based on blockchain technology.

Allianz and Nephila further announced that the successful test run demonstrated transaction processing and settlement between insurers and investors can be “significantly accelerated and simplified” by blockchain-based smart contracts.

The test also pointed to other benefits including better tradability of cat bonds and also opened up opportunities to apply the technology in other insurance transactions.

Richard Boyd, Allianz Risk Transfer Chief Underwriter, commented: “Blockchain technology would increase reliability, auditability and speed for both cat swaps and bonds as less manual processing, authentication and verification through intermediaries is required to confirm the legitimacy of payments/transactions to and from the investors.”

“By replacing the human interventions which are currently embedded throughout the entire risk transfer process, frictional delays and the risks of human error are completely removed – with a radical effect on the speed and efficiency of the process and, in the case of bonds, on the tradability of such securities,” he added.

Allianz Risk Transfer and Nephila have worked with various firms to develop the proof of concept and extensions of this technology. These companies see blockchain technology having relevance across the insurance trade.

Optimizing payment process used in international fronting for captive insurers, in which numerous stages are required for transferring premiums from a corporation to its own subsidiary, is one example.

In recent months, large insurance firms have taken interest and started to investigate blockchain technology and its opportunities to improve services. The successful pilot test made by Allianz and Nephila is just the latest of these activities.

One of the largest accounting firms, PwC, announced earlier that they will support the research of the application of blockchain technologies in the area of insurance.

Insurance provider John Hancock also declared collaboration with ConsenSys Enterprise on proofs-of-concept using blockchain and BlockApps.

EIOPA advises to enhance the asset class under Solvency II

Walid
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EIOPA advises to enhance the asset class under Solvency II

In a report published by The European Insurance and Occupational Pensions Authority or EIOPA, published a report to advise on the extension of the infrastructure asset class for high-quality investments under Solvency II.

The report covers the Technical Advice to the European Commission (EC) on the identification and calibration of infrastructure corporates.

EIOPA's flag flapping in front of Westhafen Tower
EIOPA’s flag flapping in front of Westhafen Tower

The said advice was established upon request from the EC to further elaborate on the Advice of 29th September 2015 where EIOPA proposed a new asset class under Solvency II for investments in infrastructure projects.

In its latest advice, EIOPA recommends to extend this asset class in two ways. The first one is to let certain infrastructure corporates to qualify for the management for infrastructure projects only if there is an equivalent level of risk.

The second is to generate a separate differentiated management for equity investments in high-quality infrastructure corporates.

EIOPA proposes to reduce the risk charges for equity investments if the corporates have a lower risk profile. Insurers are required to conduct adequate due diligence and create written procedures in order to monitor the performance of their exposures and EIOPA also recommends that they perform stress testing on the cash flows and collateral values supporting their investment

Gabriel Bernardino, Chairman of EIOPA, said in a statement: “After having carefully analysed the evidence available, we propose a risk-based enhancement of the Solvency II asset class for high-quality infrastructure investments regarding infrastructure corporates. As infrastructure investments can be complex, they require prudentially sound treatment and specific risk management expertise. Where the risks are probably managed, our proposals will help insurers to match their long-term liabilities, to increase their portfolio diversification, and thereby better protect policy holders and support the strategic objective of building the EU Capital Markets Union”.

EIOPA’s Financial Stability Report consists of two parts – the standard part and the thematic article section. The standard part is structured as in previous versions of the EIOPA Financial Stability Report.

The first chapter discusses they key risks identified for insurance and occupational pension sectors. The second, third and fourth chapter provides the final qualitative and quantitative assessment of the risks identified.

This assessment is done in terms of the scope as well as the probability of their materialization using economic techniques and qualitative questionnaires. Finally, the thematic article elaborates on the impact of mergers and acquisitions on European insurers using data on equity prices.

Lloyd’s represented in Latin American Market with new Colombian office

Walid
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Lloyd’s represented in Latin American Market with new Colombian office

Advent and Brit, two Lloyd’s insurers, have been represented on the Lloyd’s Colombia Platform, alongside the Lloyd’s representative office.

Led by the first Colombian General Representative for Lloyd’s, Juan Carlos Realphe, the new office was created to focus on developing trade relationships in the Latin America market, which is expanding quickly.

The Chairman of Lloyd’s, John Nelson, called Colombia “An important part of Lloyd’s future growth strategy, both as a fast-growth market and as a gateway to Latin America.” He was reportedly delighted to be expanding into the Latin American market through Colombia, “a growing economy which is making significant investments for the future.” Beneficial for Lloyd’s growth into this emerging market is the fact that insurance penetration there is one of the lowest in the region, at just 1.6% GDP.

Furthermore, according to Nelson, “as Colombia realises its economic potential, insurance and reinsurance can play a key role in supporting this economic growth by improving resilience, taking risks out of the country, and helping the economy recover after catastrophes.”

While in Colombia to open the new office, Nelson met with Colombia President Santos and the country’s Minister of Finance, Mauricio Cárdenas. In the meeting held at the Presidential Palace in Bogota, they spoke about Colombia’s economic and political transformation in the past decade, and how insurance can play a vital role in supporting and protecting the country’s long-term business and economic growth.

Finally, Lloyd’s held a launch event attended by insurance professionals in the country, where Nelson highlighted the Colombian Government’s “4G” infrastructure project. Through it, 8,000 kilometres of roadway and 3,500 kilometres of four-lane highway will be developed throughout the country

This project will serve to boost the Colombian economy and drive increased growth for the future. With the nation’s government keen to increase Colombia’s competitiveness in Latin America, there is, as Nelson stated at the event, “a real sense of global confidence in Colombia’s future.”

Initiatives such as the 4G project and Lloyd’s entering the Colombian market will help protect their economic growth and further support Colombian businesses as they work to expand into new markets themselves.

In the words of Nelson, “by leveraging our world-class brand; by bringing our underwriting expertise, innovation and financial strength to help attract new business into the Colombian economy – we think we can add real value that will benefit the country as a whole.“

US Justice Department moves to block health insurer deals

Walid
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US Justice Department moves to block health insurer deals

By Caroline Humer and Carl O’Donnell

NEW YORK (Reuters) – U.S. antitrust officials on Thursday moved to block an unprecedented consolidation of the national health insurance market, filing a lawsuit against Anthem Inc.‘s proposed purchase of Cigna Corp and Aetna Inc.’s planned acquisition of Humana Inc.

The U.S. Department of Justice said the two multibillion-dollar mergers would reduce competition, raise prices for consumers and stifle innovation if the number of large, national insurers were to fall from five to three.

It was the latest example of the Obama administration challenging massive combinations in major industries, from oilfield services to telecommunications.

“We will not hesitate to intervene. We will not shy away from complex cases,” U.S. Attorney General Loretta Lynch told a news conference on Thursday. “We will protect the interests of the American people.”

The deals would hurt consumers in the different markets served by the four companies, from medical coverage provided by large corporations to their employees to Medicare Advantage plans for the elderly and insurance sold to individuals on exchanges created under President Barack Obama’s healthcare reform law, the Justice Department said.

“We have no doubt that these mergers would reduce competition from what it is today,” said Principal Deputy Associate Attorney General William Baer, who spearheaded the antitrust reviews.

Merging Aetna’s and Humana’s Medicare Advantage businesses would create the largest U.S. manager of the healthcare insurance for seniors and the disabled.

The Anthem deal for Cigna would create the largest U.S. health insurer by membership, with about 53 million members, surpassing UnitedHealth Group’s 45.9 million as of June 30, and make it the leader in employer-based health insurance.

Aetna and Anthem had each argued their proposed purchases would help lower prices for consumers by giving them greater leverage in negotiating with doctors and hospitals.

Aetna vows legal fight

Aetna and Humana said Thursday they plan “to vigorously defend the companies’ pending merger,” worth $33 billion (£25 billion).

Aetna Chief Executive Mark Bertolini said the company has proposed divesting enough assets to ensure competition in markets where it overlaps with Humana.

“If we can’t come to a negotiation on what markets to divest, although we have two very complete remedies in front of the Department of Justice now, I think I’m willing to let a judge decide,” Bertolini told business news channel CNBC. “We’ll go all the way we need to to make this happen.”

Anthem had a more muted response, saying it was committed to working toward a settlement with the Justice Department for its $45 billion transaction, but would challenge the lawsuit if necessary. Cigna said it was evaluating its options. It does not believe a deal would close before 2017, “if at all.”

After news of the lawsuit, Humana raised its 2016 earnings forecast, saying its core businesses, Medicare Advantage and Healthcare Services, are performing better than expected. Humana shares rose 8.3 percent.

Cigna climbed 5.4 percent, Anthem closed up 2.6 percent and Aetna rose 1.6 percent. Speculation that the U.S. government would block both deals had weighed on shares of all four insurers for several weeks.

Humana’s raised forecast “bodes well for the rest of the industry. Now you can expect the other guys to report good numbers and perhaps raise guidance as well,” said Jeff Jonas, portfolio manager for Gabelli Funds, which holds Cigna and Humana shares.

“There’s somewhat of a relief rally, too, given that this has been an overhang for so long, particularly with Anthem and Cigna,” he said.

Concern for different consumers

In the lawsuit against Aetna, the Justice Department cited specific concerns about damage to 1.6 million people in 364 counties who are customers of Medicare Advantage, the program that serves older people.

It also said there were issues for the individual plans sold on Obamacare exchanges, where the government has sought to spur competition and keep prices low.

About 20 state insurance departments were required to review the Aetna-Humana deal. Missouri came out firmly against it, while others, including California and New York, approved it after reaching a settlement.

In the lawsuit against Anthem-Cigna, antitrust regulators said the combination would substantially lessen competition in an already consolidated industry, harming millions of Americans, doctors and hospitals.

The Justice Department said it was concerned about the impact on the national corporate business, which serves large companies and which it said has only four competitors.

It also said there were issues with local business markets, the individual Obamacare exchanges and the impact a combined company could have on contracts with doctors.

The presidential campaign of Democrat Hillary Clinton, who said when the deals were announced she was “very sceptical” they would benefit consumers, said Thursday they “applaud” the Justice Department’s decision.

“Hillary will continue to fight to reduce health costs and strengthen antitrust enforcement to prevent corporations from gaining too much market power,” Clinton policy adviser Ann O’Leary said in a statement.

Doctors and hospitals had urged the Justice Department to try to block the deal, and some large employers were also against the combination.

Aetna and Anthem had each proposed asset sales to the regulators, but they did not adequately address the loss of market competition, Baer said.

Eleven states and the District of Colombia joined the Justice Department lawsuit against Anthem and Cigna; eight states and DC joined the lawsuit against Aetna and Humana.

If the government successfully scuttles the deals, Anthem would owe Cigna $1.85 billion in breakup fees. Aetna would have to pay Humana $1 billion. If the deals fail for other reasons, the breakup fees would be different.

The unusual move against two deals in the same industry represents a repeat of history for Baer, who headed the department’s Antitrust Division until a short time ago and is now the No. 3 official in the Justice Department.

In March 1998, Baer asked a court to stop a major consolidation of the U.S. drug wholesaling business. McKesson Corp had sought to buy AmeriSource Health Corp, and Cardinal Health wanted to buy Bergen Brunswig Corp. A court granted the preliminary injunction.

(Reporting by Caroline Humer and Diane Bartz in Washington DC, additional reporting by Jon Stempel, Lewis Krauskopf and Carl O’Donnell and Bill Berktot in New York; Editing by Michele Gershberg, Nick Zieminski and Bernard Orr)

Broker Arthur J. Gallagher expands in Scandinavia with Brim’s acquisition

Melanie
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Broker Arthur J. Gallagher expands in Scandinavia with Brim’s acquisition

US-based insurance brokerage and risk management services company Arthur J. Gallagher & Co. (AJG) has further cemented its presence in Scandinavia through the acquisition of 85 percent majority share in Brim AB.

Through this buyout, AJG taps into a first-class client base of about 2,000 diverse customers.

The acquisition is also a boost to AJG’s successful purchase of Norway-based marine, energy and specialty insurance broker Bergvall Marine in December 2013.

As part of the deal, CEO ikard Öijermark and partner Fredrik Enderlein will continue Brim’s operation under the ultimate headship of Grahame Chilton, head of AJG’s international brokerage operations in London.

Established in 2001, Brim is a specialty insurance and reinsurance broker that offers two core practices. Its credit and political practice provides financing support for key infrastructure projects worldwide, while the construction practice supports commercial and residential building development, as well as infrastructure and civil engineering across Finland, Norway and Sweden.

The Sweden-based company now employs 19 people and generates approximately 11 million revenues per year.

In 2013, Brim snagged the prestigious Insurance Award from Risk & Försäkring, a unit of Svenska Nyhetsbrev, a top supplier of independent business, financial and industrial news in Sweden.

That same year, it opened an office in Dubai as part of its customers’ international expansion.

Arthur J. Gallagher and Brim have been global alliance partners over the years; AJG’s London office has assisted Brim on its projects with Lloyd’s of London.

“Brim’s operations are highly regarded and well respected in the International insurance market. For many years, we have had a successful correspondent trading relationship with Brim, during which time we developed strong working relationships with their team,” said J. Patrick Gallagher, Jr., Chairman, President and CEO of AJG.

“Taking this next step allows us to partner with an outstanding group that has extensive experience in their particular markets, adds their expertise to the long list of capabilities we will be able to offer our international customers, and broadens our Scandinavian presence. We are extremely pleased to welcome Rikard, Freddy and their colleagues to our growing Gallagher family of professionals.”

Rikard Öijermark, CEO of Brim, commented: “We have enjoyed great success working with Gallagher’s London Specialty, International and Reinsurance teams and built a strong rapport with the organisation and its leadership. Being part of the Gallagher group will open up new avenues of growth for us globally, along with access to a whole new range of products, services and capabilities to offer to our clients. We see a great and exciting future ahead of us and look forward to becoming part of the Gallagher team.”

Brim’s acquisition is AJG’s first purchase in the third quarter of 2016. In the previous quarter, it completed 10 buyouts as part of its strategic international expansion.

Aside from expanding the company’s geographical reach, these acquisitions also support its portfolio of services and reinforce its position in risk management industries and retail and wholesale insurance brokerage services.

Memorandum of Understanding signed between Europe and China

Danielle
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Memorandum of Understanding signed between Europe and China

The European Insurance and Occupational Pensions Authority (EIOPA) and the China Insurance Regulatory Commission (CIRC) have recently met in Budapest to sign a Memorandum of Understanding. Through it, both authorities agree to participate in an Executive Committee meeting of the International Association of Insurance Supervisors (IAIS).

The Memorandum forms the basis for cooperation between the two regulatory bodies, in order to achieve three objectives:

  • Building a practical framework for exchanging supervisory information
  • Updating one another on regulatory and supervisory framework developments for both insurance and private pensions
  • Increasing mutual understanding of the Chinese and European supervisory regimes for insurance

By signing this Memorandum, both the EIOPA and CIRC have agreed to set up joint annual work programmes and expert task forces, as well as provide speakers for events organised by both authorities. They will also pursue other joint activities.

The two authorities have also pointed out that signing the Memorandum does not include a legal obligation to exchange confidential information, nor does it create any legal obligations between the parties involved or the European Union.

Chairman of the CIRC Xiang Junbo stated, “The China Insurance Regulatory Commission and the European Insurance and Occupational Pensions Authority have always enjoyed a close relationship. The signing of this Memorandum of Understanding is a declaration of the two sides’ common vision to further our mutual communication and supervisory cooperation.”

Under the framework of the Memorandum, the two parties believe that more could be done to facilitate the exchange of information and experiences between the European and Chinese authorities.

For his part, Gabriel Bernardino, the Chairman of EIOPA, pointed out that, “the constant process of deepening ties between Europe and Asia and increasing cooperation is crucial for effective supervision and adequate protection of consumers.”

By signing the Memorandum of Understanding, he hopes to take an important step to further develop the relationship between both the Chinese and European insurance authorities, thus ensuring “improved supervisory convergence” worldwide in time.

EU-US Privacy Shield promises stronger data protection

Melanie
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EU-US Privacy Shield promises stronger data protection

The European Commission (EC) has formalised the adoption of the EU-US Privacy Shield, a new framework for transatlantic data transfers, placing greater obligations on US companies to protect European’s personal information.

The Privacy Shield replaces Safe Harbour, a similar agreement that was invalidated in October 2015 following a customer’s lawsuit against online social networking service Facebook. The complaint hinged on leaked documents by Edward Snowden, a former contractor of the US National Security Agency (NSA)—an incident that hinted at sharing of European’s private information with US intelligence agencies.

For Europeans, the new framework means greater transparency on transfer of personal information to the US and stronger protection of personal data. It also provides for an easier and cheaper redress possibilities in case of complaints.

As for American companies, it requires them to do annual self-certification that they abide by the requirements. They also have to display privacy policy on their websites, reply promptly to complaints, and cooperate and comply with European Data Protection Authorities.

Under the new framework, the US Commerce Department will have regular updates and reviews of companies to ensure compliance. Those found not following the rules will face sanctions and be removed from the list.

The Privacy Shield also gives assurance that access to information by public authorities is subject to limitations, safeguards and oversight mechanisms.

The new arrangement promotes effective protection of individual rights, providing citizens with various accessible and affordable resolution mechanisms. An annual joint review mechanism will also overseer how the Privacy Shield performs.

“We have now approved the new EU-US Privacy Shield which will protect the personal data of our people and provide clarity for businesses” said Andrus Ansip, vice-president for the Digital Single Market at the EC, in a news release.

“We’ve worked hard with all our partners in Europe and in the US to make sure this deal is right and to have it signed and sealed as soon as possible. Data flows between our two continents are essential to our society and economy, and we now have a robust framework in place ensuring these transfers occur in the best and safest conditions.”

Technology giants have been awaiting the adoption of the Privacy Shield as compliance enables them to gather and transfer European’s information without violating European’s data protection and privacy laws.

During the talks that ultimately led to the adoption of the new framework, many technology firms including Apple, Google and Microsoft said they lauded the new framework and were preparing to achieve compliance.

It, however, remains to be seen if the EU-US Privacy Shield will pass in the European Court of Justice. Privacy rights organisations have already expressed opposition against the new deal, saying its measures to safeguard European’s information from US intelligence agencies are not sufficient.

The risks created by Pokemon Go

Daniel
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The risks created by Pokemon Go

The Pokemon Go craze is demonstrating how digital entertainment can create risks in the real world. At least three accidents have been blamed on the app-based game based on the corny collectors’ cards popular in the 1990s.

pokemon-anime

Pokemon Go creates risks because it is an “augmented-reality” game which directs players to specific real-world locations using a phone’s GPS. At the locations the players are supposed to catch Pokemon characters. The risk is created when players get distracted by the game and stop paying attention to their surroundings.

A 15-year old girl in the American state of Pennsylvania was hit by a car on 13 July; after the game directed her to cross a busy highway, the Associated Press reported. The girl was taken to hospital with an injured collarbone and foot after being hit by a vehicle.

Two men fell off a seaside cliff near San Diego, California; while playing Pokemon Go on 13 July. Fire-fighters had to rescue the men after one fell 80 to 90 feet; and another fell 50 feet (15 meters), to the beach below. Both men were taken to hospital with unspecified injuries.

damaged car
Damaged car after player drove it into a tree whilst trying to catch a Pokemon sea creature

Upstate New York resident Steven Cary suffered a broken leg and lacerations after driving his car into a tree, The Smoking Gun reported. Cary admitted that he was trying to catch the Lapras Pokemon and driving when he hit the tree. The car was completely destroyed in the accident photographs indicate.

A different kind of risk was reported in San Luis Obispo, California; where Pokemon Go directed players to a halfway house for convicted sex offenders according to The San Diego Union Tribune. The newspaper speculated that the Sunny Acres halfway house may have been included in an older app that was incorporated into the game.

There is also a risk of robbery; three Pokemon Go players were held up by an unidentified gunman in College Park, Maryland, near Washington DC, The Baltimore Sun reported. The college students encountered the robber when Pokemon Go directed them to a local landmark.

Death by Pokemon

News coverage indicates that Pokemon Go is encouraging risky behaviour around the world. Police in Cambridgeshire, UK issued warnings after police officers were called over because of players were climbing roofs and trespassing on private property.

Some observers fear that Pokemon Go will lead to a fatality. If the deadly accident occurs in the United States it will undoubtedly lead to a wrongful death lawsuit.

“Death by Pokemon is coming” Gerry Beyer, a law professor at Texas Tech University told Fox News. “Pokemon users will have all sorts of accidents as they use the program while walking, biking, driving, etc.”

In addition to accidents there is a risk of fatal shootings. Beyer noted that under the law in some American states; including Texas and Colorado, it would be legal for a property owner to shoot a trespassing Pokemon Go player. Those jurisdictions have the so-called “Make My Day Law” which allows residents to use deadly force to protect their homes, on the books.

Another risk players would face is being shot by guards at high-security installations. Three teenagers were detained at the Perry Nuclear Power Plant in Ohio after Pokemon Go directed them to the facility on 12 July, Fox News reported.

Who is liable for Pokemon Go damages

The obvious question that Pokemon Go raises for insurers is liability. Who would be liable for injuries, deaths or damage related to the game?

Are the players responsible for their actions, or do the game’s owners and creators have some responsibility for enthusiasts’ behaviour? An argument can be made that Pokemon Go is manipulating impressionable and immature individuals including teenagers.

Personal injury attorneys in the United States will undoubtedly argue that Pokemon Go’s owners and are responsible for damages because of their deep pockets. Pokemon itself is the property of The Pokemon Company; a Japanese consortium that includes video game maker Nintendo

Nintendo has certainly been profiting from Pokemon Go, its market capitalization more than doubled in the week after the app was released, The International Business Times reported. The value of Nintendo’s stock increased from £9.1 billion ($12 billion) to £22.74 billion ($30 billion).

Are game developers liable for damages

Also liable is Niantic Inc., the San Francisco start up that developed the game itself. Niantic is receiving around 30% of the profits from Pokemon Go sales through the App Store and Google Play, Macquarie Capital Securities Analyst David Gibson estimated. Apple Inc.; which owns the App Store, and Alphabet Inc. – which owns Google Play – are also receiving a hefty cut of the Pokemon Go royalties, Gibson speculated.

That means all of those companies will be targets for Pokemon Go related lawsuits. It also indicates that they and other app game developers might be require some sort of specialized insurance coverage. Another potential product is some sort of liability insurance for game players, which might even be sold with the app.

Niantic itself has admitted it has some liability; by including recommendations that players must be aware of the surroundings, and not enter private property without permission in the game. Niantic has also claimed it is not responsible for property damage, a determination that can only be made by the courts.

The liability question in the United States is complicated by homeowners and renters insurance. Some of those policies cover damage to other people’s property, the Insurance Information Institute noted. That creates the potential for litigation involving insurers, players or their parents, the game’s owners and developers and property owners. Some insurers are sure to argue that Niantic, Nintendo; and possibly Google or Apple, are liable for damages caused by players.

Lawsuits arising from Pokemon Go may lead to important precedents because augmented-reality app games are becoming big business. Between 6 July and 12 July, Pokemon had attracted 21 million users in the United States alone, SurveyMonkey reported.

Pokemon Go demonstrates how digital products can create real world risks and increase liabilities. Insurers will have to take account of those risks and create new kinds of coverage to deal with them.

Silicosis class action lawsuit – Claimants win first round

Walid
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Silicosis class action lawsuit – Claimants win first round

In the first round of a class action lawsuit, which has garnered a lot of international publicity, silicosis claimants had their class action lawsuit approved. This move could potentially cost the gold mining industry upwards of $3.25 billion USD.

Back in May 2016, the High Court in Johannesburg South Africa, awarded the certification judgment which has provided the opportunity for approximately half a million miners to claim compensation from former employers.

A miners attorney speaking to journalists outside the South Gauteng High Court in Johannesburg
A miners attorney speaking to journalists outside the South Gauteng High Court in Johannesburg

In the last 10 years, lawyers in the United States, United Kingdom and South Africa have been making alliances in the effort to pursue compensation for the affected miners and their families. Initially, prosecution of damages in the UK was hampered by the English Court of Appeal, who refused to exercise jurisdiction over a mining company domiciled in the UK. That case was Young v Anglo American South Africa Ltd and Others, 2014. It is worth noting that damages are generally more generous in the UK than in South Africa.

In South Africa, back in 2006, an initial action by Mr Makayi for damages against his former employer, AngloGold Ashanti, was started. It alleged that their negligence resulted in him contracting silicosis.

The disease is only contracted through exposure to silica dust, a byproduct of mining for gold. It is alleged that the risk of contracting tuberculosis is increased by inhaling the dust, resulting in the disease.

The company challenged the action and claimed that Mr Makayi had been compensated through statutory framework under the Occupational Diseases in Mines and Works Act of 1973.

However, the Constitutional Court in South Africa decided that the statutory framework was separate from a compensation framework created by the overarching legislation. As a result, the claim was approved to proceed. As a result, this opened up the courts to three separate groups of litigants who sought certification for a class action suit against their own mining employers

In 2012, those three applications were consolidated – in 2015 they were argued, giving rise to the May 2016 certification judgment. The consolidated case is Nkala and Others v. Harmony Gold Mining Company Ltd and Others, 2016.

Initially, the court determined that notwithstanding, prosecution based on an alleged breach of a fundamental right in the South African Constitution meant certification by the court was necessary. It made the decision based on limited local jurisprudence because class action lawsuits are relatively new in South Africa. Failing to certify could potentially lead to an abuse in process.

Next, the court looked at whether the applicants met the requirements for certification, namely:

  • Whether the class was defined with the appropriate precision
  • If there were common issues of fact or law capable of class action determination
  • Whether allowing for a class action suit was appropriate in the circumstances

Despite the overbroad definition of the classes, including miners who had silicosis or tuberculosis or their descendants, or the fact that the period covered was lengthy, including all those affected after 1965, the court decided that the proposed class was capable of objective determination.

It was also considered whether there were enough common, factual issues that could be dealt with; regarding claims against mine operators, the court pointed out that applicants should provide evidence of the following:

  • Mining companies working to deprive miners of basic health and safety rights
  • A relationship between silica dust exposure and silicosis
  • Reports by different commissions showing lack of compliance with statutory rights
  • That since 1990, mining companies were aware silicosis was preventable through safer mining practices
  • That the results of investigations demonstrated exposure to silica dust and flouting internationally-accepted best practices

The court also decided that given the amount of technical evidence, individual miners would struggle to prosecute their actions separately. As the evidence applied generally to each of their cases, multiple claims would only be a burden on the court system and swamp them with repeat evidence. As such, a class action suit was deemed to be more appropriate.

Next, the court ruled that parent companies that advised and guided operating companies should also form part of the class action lawsuit because they could answer factual issues the claimants presented.

The information presented satisfied the court that the matters of law could be dealt with most effectively in this way, including:

  • Whether any breaches of health and safety legislation could increase the imposition of strict liability
  • If both joint and several liability could be imposed on multiple mining companies if they had employed the same miners
  • Whether causation could be of the legal principle could be determined, shifting the burden of proof to prove miners who contracted silicosis or tuberculosis did so at the hands of their former employers

Ultimately, the court decided a class action lawsuit was the most realistic way to provide access to the courts to pursue this matter. While this decision was expected, the more noteworthy decision was that damages for pain and suffering could be transferred to miners’ estates even after pleadings were closed.

On the other hand, the miners argued that the rule of common law infringed on provisions to protect them under the South African Bill of Rights. These included the right to equality. The court also took into consideration the other jurisdictions such as the UK and ruled it would be a huge injustice if common law wasn’t appropriately applied.

Most recently, on 6th July the mining companies filed the intention to appeal. The case will now proceed through the court system; if and when it’s heard, it will certainly result in more upheaval of the gold mining industry. It should also impact how South African jurisprudence is developed.

What this case really shows is that between the claimants and the international jurisprudence, it has truly become far more than just a South African issue. This is truly an interesting matter that will continue to garner attention worldwide; many mining companies and investors will be closely monitoring the outcome.

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