John B. Riggs | CTO & SVP, Applied Technology Solutions at HSB.
Buildings—we spend most of our time in them, whether living, working, playing or socializing. Our physical and psychological well-being, not to mention our productivity, are influenced by these environments in many ways.
As our needs and usages have become more nuanced, the demands on our buildings and related infrastructure have increased. Older buildings must be retrofitted to stay current, and new buildings are required to meet evolving standards and accommodate a vast array of functions and activities.
Buildings also have to be malleable and adaptable to changing usages and conditions. Look no further than the pandemic, which forced a reckoning with how buildings could be vectors of—and barriers against—an invisible menace. For companies and organizations facing increasing environmental, social, and governance (ESG) mandates, and the sudden ubiquity of AI, the physical environment is one of the first places to make significant positive impacts.
Buildings are like living organisms—complex assemblages of materials, technology and people. Older technologies like pneumatic controls and elevators have become vastly more sophisticated over time, while new technologies are added at a dizzying pace. Modern buildings are rich ecosystems replete with sensors, systems, data and protocols. We expect our environments to take on many of the functions previously performed by humans. Two examples are automated factories and hospitals where the built environment itself is a key factor in facilitating positive patient outcomes.
As buildings become more complex, the associated risks multiply. How do we identify new risks? How do we mitigate them? For insurers looking to protect their customers’ investments, these are complex challenges that often extend way beyond direct damage to the buildings themselves. Every system and every associated vendor represent an area of potential vulnerability. Here are some key areas of risk that loom prominently.
Cybersecurity
In 2013, a cyberattack resulted in a security breach that compromised credit card and password data for over 40 million Target customers. The point of vulnerability was a regional HVAC company with access to the retailer’s systems, which provided an entry point for the hackers.
Breaches like this are hardly newsworthy anymore. Vulnerabilities in building systems are routinely exploited to compromise enterprise operations. While building systems providers have worked hard to shore up security, the growing use of sensors, the complexity of integrating disparate systems, and the lack of adequate education and response readiness to attacks continue to raise the cyber risk profile of buildings. Bad actors can exploit such vulnerabilities to introduce malware in enterprise networks and life-safety systems. And the explosive increase in endpoint devices and systems means an exponential increase in vulnerability.
Insurers face a dual challenge. On the one hand, many of the technological responses exist and are being effectively bundled with insurance products as a condition of coverage. But more vexing is the cultural challenge; effective protection is contingent on clients availing themselves of the ample resources that insurers already provide to educate them as to what’s both possible and available.
Health
We’ve long recognized the relationship between air quality, human cognitive functions and productivity. “Sick buildings” are a phenomenon. Localized epidemics like Legionnaire’s Disease are associated with ventilation systems. The recent pandemic has greatly heightened and underscored our appreciation of how disease transmissibility can be significantly higher in indoor environments without proper ventilation, air filtration and humidity controls.
Even slight deviations from standards can mean the difference between health and illness in many settings. Again, the inclusion of technological upgrades as a condition of new coverage is instrumental in moving the needle in the direction of greater employee health.
Safety
The traditional hazards—fire, electrical shocks and natural disasters—have been recognized and addressed for over a century. But the complexity of contemporary buildings and the integration of the myriad smart systems within them brings a new, heightened set of risks.
Our almost total reliance on personal technologies (mobile devices) demands the deployment of robust connectivity infrastructure and communications systems that will persist even during a disaster, like a fire or an earthquake, and integrate seamlessly with systems used by external actors including first responders. Implementing and shoring up apples-to-apples communications systems is a high priority for insurers.
Environment And Sustainability
We are in the midst of a vast, accelerating transformation of our built infrastructure as we collectively respond to the ravages of climate change and the imperative for greater energy efficiency. This implies rethinking and reworking all resource-related systems (energy, water, steam and waste) in our buildings and their relationship to the broader supporting infrastructure.
Insurers can play a pivotal part by devising products and even new business models that de-risk the adoption of new technologies. For example, the “green as a service” model that’s rapidly gaining market traction shifts the burden of deployment and management of sophisticated critical infrastructure systems (like steam provision) from the company itself to outside vendors who sell the output (units of steam). This can help shift the financial burden from a capital expenditure to an operating expenditure.
Artificial Intelligence And Autonomous Systems
Increasing reliance on artificial intelligence (AI) and autonomous systems introduces another level of risk in the built environment. Insurers are scrutinizing systems and environments for risks, evaluating those risks and devising responses. How do we operate in an environment where the law of unintended consequences holds sway? How do we anticipate and mitigate circumstances which might never have occurred before? Many insurers have established “white hat” hacker groups to try and pressure test their own systems and identify new areas of vulnerability so they can devise effective protection and remedies.
In Conclusion
Dealing with these risks can be complicated, but addressing them is critical to the future of our world. As insurers, it is a key responsibility to increase awareness and provide the tools and frameworks that help business owners and operators identify and analyze risks exhaustively, objectively and scientifically. In this way, you can help protect customers in the face of adversity and promote and de-risk the adoption of techniques and technologies that enhance the well-being of us all.
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