The future is anyone's guess but if you want to brace yourself for technology-related subrogation complexities on the horizon, then you should listen to Guy Fraker, director of business trends and foresight at State Farm Mutual Insurance Co., as many attendees did Monday at the annual NASP conference.
At the management-track session, "The Future of Subrogation," Fraker presented attendees with a muddled reality for which there are currently no easy answers. The new normal is that rising technologies that affect insurance are hitting the consumer market space at a rate that is vastly ahead of the policy procedures of most insurers. As a result, the lines of culpability are becoming increasing gray. In addition, many emerging technologies haven't been adequately tested, and questions remain about the effectiveness of certain developments made through alliances and joint ventures.
"We must recognize that the exponential growth in technology capability is matched with an equally dramatically collapse in the cost per unit for technology," Fraker explained. "Those two forces essentially combine with a demographic profile in the U.S. that we have never experienced as a country." That different demographic equates to a surge in tech adoption rates.
Having learned the source of the imbalance, how can the subro industry even begin to navigate this unfamiliar terrain of liability? To facilitate discussion, Fraker posed some precarious scenarios that are gaining prevalence. For example, a driver relies on his SUV's rearview camera to safely maneuver out of a driveway and onto a busy road. When the camera malfunctions, the driver backs into another car. Who is really at fault?
"We'd automatically consider this a chargeable accident, but a subrogation opportunity may exist," he said. "The problem is that the insurer may not even be aware that the car is equipped with that camera unless the policyholder mentions it. Another possible scenario would be adaptive braking that fails in stop-and-go traffic."
Sure, the automotive area is a logical starting point, but the issue is seeping into other sectors, Fraker said.
"The same thing is happening in homeowners," he reported. "Many companies provide remote control entry through a Smartphone application. If that goes haywire or is hacked, then that could allow entry into home or prevent egress if someone is injured or items are stolen."
Fraker encourages subrogation professionals to pay attention to technologies as they emerge and develop, along with issues related to them. However, researching new options and trends is just the beginning.
"We must address this," Fraker urged. "We have a choice to make. Are we going to sit back and let automotive manufacturers, technology providers, and public policymakers decide this for us? Or will we take a lead position in collaborating with public policy and manufacturers in order to craft something that everyone can live with? Someone needs to step up and take a lead."
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