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The "Swiss Re SONAR 2018: New emerging risk insights" report aims to get us talking about what tomorrow's risk landscape could look like.
The plastic in our veins – health risks from tiny particles
If it’s proven that plastic particles can impact your health, will manufacturers of plastic be exposed to increasing product liability claims? This is just one of the possible concerns for the insurance industry in the context of plastic risk. Signs of health risks from plastic particles are growing.
In 2015 according to the EU, we produced 322 million tons of plastic – that’s 42 kg for each of us living on this planet. In the EU, it was 26 kg per person, of which only 9 kg were recycled. Where does the rest end up? Some of it is dumped in landfills and some is incinerated. The rest makes its way into the environment. One example is the large plastic garbage patch in the Pacific.
The ocean isn’t its final resting place however. Radiation and waves slowly wear down the plastic and the mixed-in additives to micro- and nano-size particles. These can be ingested by marine wildlife. Some of the plastic may cause health problems for animals. Nano-plastic in brains of fish have shown behavioural changes in experiments.
The question, of course, is what happens if some of the plastic makes its way up the food chain to us? The marine food chain is not the only path, the terrestrial chain is also possible, as studies in the US have shown. Indeed, average Americans carry around a multitude of plastic residuals in their bloodstream such as flame retardants that they were exposed to from other sources.
Research on this topic is still ongoing but indications are that some long-term negative health effects are indeed in the making. Some of these indicators are based on observations of animals. But what if nano-plastic cannot only cross the blood brain barrier in fish, but also in humans?
Ultimately, even a ban of plastics is conceivable. A well-studied case is bisphenol-A: This popular softener can interfere with the hormone system – especially in infants. Baby bottles with a bisphenol-A coating were removed from the market once this research was published.
- If negative impacts on human health are proven, producers of plastic could potentially be involved in product liability claims. However, a product liability claim is only successful and compensation for bodily injury only granted provided the causal link between the product produced by the insured and the loss can be established. Given that there are various producers of plastics, proving the causal link might be difficult.
- Claims may also be filed from fisheries and other food producers if plastic particles exceed certain limits, and foods are no longer deemed safe for human consumption.
- In countries where ecological damage is defined by law, claims could be filed if an ecosystem is damaged.
- On the life and health side, health recovery costs may trend upwards in treatments for humans, and not always be adequately reflected in pricing.
Your printed heart – longer lives for artificial organs?
Artificially produced organs are supplementing human organ donation to an increasing extent. As organ donation is not keeping pace with the increasing demand for organs, innovation in this field is highly significant for patients, the medical system, and the insurance sector.
According to the British Heart Foundation, the number of patients waiting for a heart transplant has grown by 162% over the last ten years. Even though the growth in demand for heart transplants is impressive, more patients are waiting for kidneys and other organs. Also the lack of transplant tissues is a prevalent problem in many parts of the world. In the USA, 20 people a day or 7'300 a year die while on the waiting list for transplants. In 2016, although 116 000 were on the waiting list, only 33'611 transplants were actually performed. Artificial organs therefore hold out major hope.
A patient for a heart transplant has an average waiting time of 191 days. So artificial organ technology is currently used as a stopgap before patients receive a biological organ. A company in the US provides patients with fully functioning artificial hearts. Such devices, called “total artificial hearts” (TAH), have already been implanted in over a thousand patients. One patient was supported for nearly four years with the artificial device before receiving a successful human heart transplant.
However, artificial organs do not currently have a long life span. They merely serve as interim solutions – as “a bridge to a transplant.” But innovations around artificial organs or cellular therapies to restore normal function are emerging rapidly, utilising various technologies including 3D-bioprinting techniques, and stem cell-based therapies. Fully functional, long-term artificial replacements – from tissue to complex organs – are the target in so-called “destination therapy.”
The artificial organ market is expected to grow at 9.1% compound per year to USD 45.2 billion by 2022. Given the lower risk of organ rejection and the ability to mass produce organs to meet the demand, it’s a very promising industry that could solve the current organ supply shortage.
- Major organ transplant is a listed condition under a typical Critical Illness product. However, artificial organs are a grey area. It is not clear if a valid Critical Illness claim payment would be triggered if the transplanted organ were a bio-artificial organ or if it were grown in a laboratory using human cells. As flagged by the UK Institute & Faculty of Actuaries: Would the payment still be declined because the organ did not originate from a human donor?
- The UK Institute & Faculty of Actuaries raise the concern whether artificial organ transplants fall under the same legal definition as biological organ transplants.
- The potential impact on medical malpractice and product liability depends on the corresponding regulations.
Eyes wide shut - the world is sleeping less
Consider these two facts: Firstly, two out of three losses worldwide are due to human failure. Based on Swiss Re’s sigma research, this would mean that people trigger a loss volume of USD 3 billion per year. Secondly, life insurance generated premiums of USD 2.6 trillion in 2017.
These two facts are linked because tired people make more errors and insomniacs are at a greater risk of dying earlier than would otherwise be the case. The lack of sleep is associated with increased rates of heart attacks, strokes, obesity and other diseases. Sleeping less can also contribute to the development of Alzheimer’s. And recent research found that chronic sleep restriction increases risk seeking behaviour.
If these trends change the loss patterns in property and casualty or mortality rates, this could have a multi-billion dollar impact on the insurance industry in the long run.
Moreover, there are indications that the risk is real. The world is indeed sleeping less. Flexible work schedules, teleworking breadwinners holding multiple jobs or making long commutes, mean that people are spending less time sleeping and more time awake. More artificial lighting and new light qualities and technologies (LED, OLED etc.), as well as extensive use of smartphone and computer games, are adding to the problem.
- For Life & Health, a general shift in mortality patterns could result. If incidences of strokes or heart attacks with fatal outcomes increase, more policies would need to be paid out earlier, which would change the dynamics of the whole multi-billion dollar life industry. This must be viewed in the light of other risk drivers which contribute to strokes and heart attacks, such as diet or lifestyle.
- P&C business could be affected by the fact that more mistakes can occur through human action in sensitive work environments such as oil rigs, operating theatres, professionally driven vehicles (e.g. aircraft, trains, buses) or medical professions. This, in turn, can lead to an increase in frequency or severity in the affected lines of business. Some examples: for industrial facilities this could mean more man-made losses such as explosions. In the medical context, such human failures could lead to an increase in medical malpractice claims.
- Motor liability in general could face changing loss patterns with more tired drivers at the wheel.
- Fatigue affects performance and well-being of workforce also in the re/insurance industry.
Faking it – the business of counterfeit medicine
If you’re criminally inclined, counterfeiting drugs may be something to consider. According to the World Health Organization (WHO), fake drugs are a fast growing multibillion dollar enterprise. Large profits, combined with light penalties, fuel this illicit industry. 42% of the dubious medical products come from Africa, 21% each from Europe and America as well as a significant proportion from Asia. While some are used in local markets, the USA is way out in front regarding incidents with faked drugs. Asia is only second, while Africa comes in last.
Worldwide fake anti-malarial drugs were the most commonly reported, followed by antibiotics, painkillers and “lifestyle products” such as diet pills and erectile dysfunction treatments.
With so many people at risk, the insurance industry can’t ignore the problem. Fake drugs kill people, exacerbate proliferation of transmittable diseases, and increase resistances to antibiotics and other drugs. The WHO estimates that 100 000 to 1 million people die each year as a result.
Fake drug criminals exploit the increasingly complex global supply chain network. The internet has raised the availability of fake drugs outside the local regulatory frameworks through online pharmacies and other channels. In 2016, when the Irish authorities seized around EUR 350 000 worth of illegal drugs, the majority of them originated from countries such as the US, UK, Switzerland and Singapore.
- L&H: Ineffective or poisonous fake drugs increase mortality and drive up health costs, affecting individual health as well as epidemiological dynamics. These effects are probably the most pronounced in low to middle income countries, although developed markets with health insurance systems can also be affected.
- Liability, product recalls, supply chain, and reputational risk: Most companies in the supply chain will be covered by product liability, product recall and errors and omissions insurance. Manufacturers may be held liable for harm caused by fake versions of its products. Original product manufacturers will accumulate litigation costs – some of which are covered by insurance.
Inked in - the risk of tattoos
Tattoos have become fashionable in many parts of the world. In Europe alone, over 60 million people have tattoos. And every fourth person in the US is estimated to have one. Tattoo prevalence in young adults may be more than twice this number and is sometimes more pronounced with women than men.
But tattoos are chemical injections pinched into our skins by physical procedures. More than 100 colorants and 100 additives are in use. Known risks come from the application procedure, and they include viral (hepatitis and HIV), bacterial and fungal infections. Obviously, these risks increase when tattooing is applied under unhygienic conditions or with deficient materials and procedures. Insights into the long-term risk from the ink and its accumulation in the body as well as from the expected boom in tattoo removals are still not clear.
A European Commission report from 2016 on the safety of tattoos and permanent make-up states that complications such as chronic inflammatory dermatosis may not develop until decades afterwards. The report acknowledges the association of tattoo application and removal with side effects like allergies, inflammation, pigment changes and infections. Another long-term concern is cancer, since some of the ink ingredients can release carcinogenic substances under certain conditions. Still, no evidence for a relation between cancer and tattoos has been found so far.
Tattoo inks and their composition are of particular interest. Recent studies have shown chemicals in tattoo ink could enter the blood stream and accumulate in lymph nodes as nanoparticles. This could affect the immune system’s ability to fight infections. Tattoo ink is largely unregulated. The FDA has repeatedly issued warnings regarding unsafe tattoo inks available in the US. Tattoo inks are also believed to be in cosmetics, and as some contain metals, they could as yet pose unknown hazards for the skin.
- Impacts are most likely to Life & Health lines of business: an increase in the spread of HIV or Hepatitis C is possible, if hygienic standards are not adhered to during the tattooing.
- Health insurance is impacted since tattoo art has been steadily increasing. Moreover, physicians and dermatologists have also encountered a broad range of medical side effects from tattoo application and its removal. Thus, ailments such as skin bacterial infections, persistent inflammation, and hypersensitivity with chronic dermatosis could be examples of the unintended consequences of tattoos. This could contribute to an increase of health costs for the individual. Health insurance may also be impacted for removal of tattoos. This is because the rising number of these cases will increase pressure on insurance to cover the removal on medical or aesthetic grounds.
- To lesser extent, impacts may also come from product liability covers for tattoo paints or from professional indemnity covers of tattoo studios. As more studies highlight the potential risks associated with tattoo inks and its particles in nano-size within a human body, it may become easier to isolate adverse health effects of a potential patient to one particular ink and to the manufacturer/producer.
Asbestos reloaded – USD 100 billion in losses and counting
Asbestos almost proved to be the nemesis of the insurance industry. Twentyfive years ago, the deadly cancer diseases asbestos caused almost brought down Lloyds. And the industry is still counting losses. The latest total loss estimates for the US alone are approaching USD 100 billion.
The long latency of the claims is the main reason it’s so difficult to pin down exact numbers. Workers’ exposure happens while mining asbestos, manufacturing asbestos products or using it in construction. But the illness only develops 40 to 50 years later. And of course, claims only come in then.
Has society since learned its lesson and banned asbestos? Many countries have bans in place. Some have partial bans of at least the most dangerous forms of the substance. But not even all European countries have banned the use of asbestos completely. And a significant number of countries have done precious little, in particular in emerging markets. Four million metric tonnes of asbestos were still being used in Russia, India, China, Indonesia, Brazil and some other countries in 2013. In 2016, 2 million metric tonnes were mined and used mainly in Asia and Latin America. Just three years ago, a UN report showed that “one third of the 900 million people living in Europe and Central Asia are potentially exposed to asbestos at work and in the environment.”
The latest statistics recorded 15 000 deaths annually due to asbestos over the last three years. These numbers only take into account those who were exposed to asbestos 40 to 50 years ago. People currently inhaling the fibres are not included. The tens of thousands breathing in asbestos today could develop cancer and claim insurance coverage 40 to 50 years down the road.
One obvious way to alleviate the problem is to enforce national asbestos bans. The International Ban Asbestos Secretariat cites 62 countries that have introduced such bans. Absent from the list are the US, China and Russia. Other mitigating courses of action would be to reduce employeesʼ exposure through the wearing of proper respirators. Enforcement of strict safety regulations when demolishing buildings with asbestos is also a must.
- Detailed data on affected workers is still not available. Still, given the countries at risk, it is fair to assume that tens of thousands workers are exposed at the time of writing.
- We need to consider those passively exposed to asbestos fibres in the air. These fibres may stem, for example, from badly maintained buildings and structures or released accidentally during building construction work.
- Because there are safe substitute materials, the World Health Organization (WHO) and International Labour Organization (ILO) both recommend banning the material in construction.
- Wherever possible, asbestos should be excluded from re/insurance contracts.