"Our technological powers increase, but the side effects and potential hazards also escalate" – Alvin Toffler1
Never before in human history has the rate of technological advance been so rapid nor its impact so far reaching. Think Uber, Airbnb and Airtasker – these companies have revolutionised their respective industries.
With the advent of the age of the disruptor, spare a thought for those whose very business relies on the ability not only to predict change, but to assess the risk associated with it – such as insurers. This task has never been more difficult, and failing to get it right will have a direct impact on the bottom line of both insurers and their insureds.
Take nanotechnology as an example. Unbeknown to many, nano-technology is already in use all around us – in our salad dressings, in chocolate, in our medical treatments and in our cosmetics.
Nanotechnology involves the manipulation and manufacture of matter at the nanoscale, where one nanometre is one-billionth of a metre. To put this in perspective, the width of one human hair is approximately 80,000 nanometres.
The utility of nanotechnology lies in the fact that many substances exhibit different properties in their nano-form than they do in their normal state. Nanotechnology is broad and multidisciplinary, with applications across many sectors including energy production, computers and electronics, food packaging, cosmetics, pharmaceuticals and medicine. The potential benefits and application throughout many industries means nanotechnology is a rapidly developing field, and nanomaterial production is growing exponentially.
However, materials which are considered safe in their bulk form may not remain safe when broken down into smaller particles. Research suggests that some particles can have toxic effects on cells and organs when in their nano-form. This has led to concerns over unforeseen effects which nanomaterials may have on the environment and, indirectly, on human health. In short, it may be that application is moving ahead of appropriate risk assessment.
Many different insurance policies may be triggered by risks associated with nanotechnology. Product liability is an obvious one, where consumers may be affected by an inadequately articulated risk, or products may be subject to a recall notice. Environmental liability may be triggered in the context of toxicology and environmental reactions involving nanotechnologies that are poorly understood. Employers may also face liability, where workers are exposed to nanoparticles and nanomaterials during different stages of a product life cycle.
The use of nanotechnology in medicine also gives rise to unique considerations in the area of medical malpractice. Nanomedicine is in use across a vast number of fields including diagnostics, imaging, treatment, surgery, tissue engineering and bionics. Practitioners who choose to use nanotechnology in medical applications in a manner which is not yet widely accepted by peer professional opinion will have to be able to justify such use. Conversely, practitioners may face claims where they fail to offer innovative treatment, or where inexperience leads to treatment which is not provided to an acceptable standard.
Nanotechnology occupies a broad field with non-uniform risk characteristics. If the risks cannot be quantified because there is not enough research to do so, then it is possible that insurers will expose themselves to increased risk unknowingly.
Some of the unique considerations insurers should give to policy development and underwriting include:
1 Think carefully about the relevant policy period in light of the fact that nanomaterials may cause damage gradually, and into the future.
2 Review the terms used in a policy given that there is currently a lack of common language or set of definitions for nano-technology.
3 Liaise with industry to keep abreast of latest research and reports regarding the side effects of various nanotechnologies.
A recent example of potential issues in Australia concerned the use of nanotechnology in sunscreens. Issues were raised about the safety of the use of nanoparticles and whether these particles could be absorbed through the skin and poison a person. The Australian Therapeutic Goods Administration (TGA) subsequently reviewed the safety literature on titanium dioxide and zinc oxide nanoparticles in use in the sunscreens in question, actively participated in the Health, Safety and Environment Working Group of the National Nanotechnology Strategy, and reviewed its own regulatory framework.2
Ultimately, the TGA found that the products it looked at were safe for use.3 However, all this investigation was undertaken after the fact. The nanotechnology had already been introduced into everyday goods in wide use across the community. It takes little imagination to see how significant a negative outcome from the TGA review could have been for industry. It is this type of unknown that poses a significant risk for insurers.
Nanotechnology is new, exciting and constantly evolving. However, it does pose unique difficulties for underwriters, and for claims managers defending litigation. The key point for insurers is that, when drafting policies, time should be invested in understanding the unique risks specifically associated with the type of nanotechnology the particular insured is dealing with. Given that the risks are not always known in this novel area, insurers will also need to carefully consider whether any carve-outs should apply.
When it comes to defending claims, it will be key for the legal team to look at the standard of care or industry practice that applied at the time. This is vitally important given the pace at which this technology is constantly developing and changing.
Nanotechnology is already here, and here to stay. While it operates at a level no human can see, the repercussions of its use will be felt long into the future. Like many innovations, it offers great opportunities for business – and for those insurers able to grapple with the complex risk issues and carve out a competitive advantage with relevant policy wordings. It is the potentially unforseen outcomes of its use which may arise tomorrow, that the insurance industry must protect itself against today.
- Alvin Toffler, Future Shock, Random House, page 429 (1970)
- David H Guston, Encyclopaedia of Nanoscience and Society, SAGE Publications, California (2010)
- Therapeutic Goods Administration, literature review on the safety of titanium dioxide and zinc oxide nanoparticles in sunscreens (August 2013)