Rate of Change – The Unseen Crisis

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Harry RhulenThis article is the second in the Crisis as a Peril™ series authored by Firestorm CEO Harry Rhulen for The Insurance Research Letter. Read the series in its entirety, and sign-up to receive The Letter here

Peril Part 2 Technology is changing faster than anyone realizes. The rate of change is one of the biggest exposures the world faces today. Individuals, even those working in the technology field, are no longer able to forecast what the vulnerabilities and threats are of the technologies that are being created. Interestingly, Hollywood does a better job forecasting our exposures than people do.

Unanticipated changes and the associated risks created have outpaced c-level officers, board members, risk managers, brokers, underwriters, actuaries, and claims managers. What is covered and what is not covered becomes a race for certainty in an uncertain, constantly changing world. What is your plan? Who is to blame for the failure to insure? How did we get here? What do I do now?

Crisis as an IcebergIn the past couple of years we have seen concerns about technologies such as drones expressed in the media, but this is the tip of an iceberg. What we really need to focus on are issues such as those raised in the movie Terminator. We are now at the point where computers are starting to self-program. Artificial intelligence has already reached the point where a human, communicating with a computer on the phone, will not be able to differentiate whether they are talking to flesh or a machine. Daily, we hear talk on television of smart cars. Already, there are many cars on the market which automatically brake if the driver fails to notice a hazard. Fully automated cars are already a reality. There is significant discussion about the decisions that the car will make in life or death situations.

Technology is evolving at an ever-increasing rate. Disassociated technologies are now being combined to create ideas that were never conceived of nor anticipated. What happens if we combine a self-programming computer with a defense oriented computer? What happens if our automated car is faced with a choice of running over a dog or hitting a tree?

When e-mail first came out, we all made mistakes. Sometimes they were funny, sometimes not so much. Occasionally, hitting “Reply All” resulted in everyone seeing a picture from the corporate picnic that was just a little embarrassing. Sometimes it meant people being fired. In today’s world, technologies like texting have evolved from a very convenient way to communicate, into a way that inappropriate pictures are circulated by students, and sexual predators can manipulate our children.

The Millennials, the new business generation, have grown up with technology. Technology is an extension of who they are and what they do. They are rarely without their smart phone, and every device including their car, their TV, their computer, their household appliances, and almost everything other thing is Web-enabled. The opportunity for any one of these things to create a crisis is real and significant.

In today’s Web-enabled world the ability of talented thieves to steal personal information is overwhelming. The scary possibility that someone could take over control of your moving vehicle is very real. The probability that an unmanned vehicle could be used to deliver an explosive device is extremely high. The likelihood that some rogue country or organization will use technology in a way which is cataclysmic, is very high.

The rate at which the world is changing is the biggest threat to human survival. Yes, technology is giving us the ability to solve many of the problems and mysteries that have plagued civilization in centuries. Many diseases will be cured in the near future due to the mapping of the human genome. The ability of computers to crunch incredible amounts of information has enabled researchers to vanquish certain diseases, with many more set to go in the near future. Similarly, however, the same tools can be used for significant harm. In the same way that researchers are looking to do good, there are those out there designing bacteria, viruses and even complex living organisms that represent a true danger to the human race.

In the past, technology changed slowly compared to today’s rate of change. The threats that were created evolved over time periods that were manageable. This is no longer the case. Exposures that did not exist yesterday are fully realized and operational tomorrow. Technologies which once cost millions can now be purchased at Best Buy. It was not long ago that nuclear proliferation was the biggest worry in the world. That concept pales by comparison with some of the exposures which are now developing around the world.

Risk management, insurance, actuarial science and many other pursuits draw information and reference from the past in order to predict the future. Unfortunately, the rate of change has made it such that the information from yesterday may be useless in predicting what is coming tomorrow. One thing is sure, the crises on the horizon are very different than anything we have experienced before. We can prepare for them by recognizing Crisis as a Peril™.

By being prepared for crisis itself, we can start to develop the culture necessary to respond effectively. There is no way anyone can know what the next catastrophe looks like, but we can prepare.

The ability of any individual to record and publish information on the Internet has further changed the world forever. Brands that took decades or centuries to build can be destroyed in 140 characters. Brands that did not exist yesterday, can go viral and become household names tomorrow. In the beginning, computers were time-savers. They did work more rapidly than the human could. Recently however, we have crossed a threshold and very few people realize it: the computing power and storage capability of computers have now gotten to the point where the change in capability happens so rapidly that what was true yesterday may no longer be true tomorrow.

How did we get here?

BellOn March 10, 1876 Alexander Graham Bell uttered several words which changed the way humans communicated forever. He said “Watson, come here, I want to see you.”   As everyone knows, Mr. Bell said these words over the first telephone. While the invention of the telephone was a monumental accomplishment, from a technology perspective, what Ray Thomilson did in 1971, changed the world as we know it, forever.   In 1971 Mr. Thomilson sent “QWERTYUIOP”, or something along those lines, in the first e-mail.

Not only did e-mail change everything about the way people communicated, but it created an equally significant number of vulnerabilities and threats. Prior to e-mail, the fax machine was a slow, but reliable way to transmit fairly small numbers of documents. As civilization evolved, the need to transmit information more and more quickly evolved as well. In the same way that the Pony Express came into existence to solve a communication issue, so did the concept of overnight mail. UPS, Federal Express and Express Mail from the US Post Office became huge businesses when someone realized that it was possible to send volumes of information, reliably, overnight. Again, however, technology was waiting in the wings to destroy a potential business. As e-mail developed, and as computers and their transmission speeds went up, the number of packages sent via overnight mail plummeted.

The US Post Office has had to reinvent itself many times in recent years. It is still not doing well financially. While it is viewed as an essential part of the national infrastructure, technology has diminished its relevance. In a world that sends billions of bits of information daily over electronic means, who needs the US Post Office. How have Federal Express and United Parcel Service managed to stay in business?


The overnight package delivery business has adapted to a society that has expectations of instant gratification. Internet-based commerce has changed the way people buy almost everything. What is the outcome of this change? The destruction of the retail business as we knew it.

Until the recent decade, commerce in most towns and cities took place locally. If a person wanted to buy food, they went to a local grocery store. If they wanted a bicycle, they went to the local bike shop. If a business wanted to purchase 1000 golf shirts with their corporate logo, they went to a local provider who facilitated this type of transaction. All of this has gone by the wayside. Commerce is now conducted over the Internet. Doing business locally other than for socialization or medical care, is not a concept which the next generation understands nor embraces. The ability to check prices on everything, to purchase from anywhere and to be completely aware of the entire transaction is an expectation. Today, the corporation can buy their golf shirts directly from the manufacturer in China. They can have the product delivered to their door via numerous overnight delivery companies. Groceries can be purchased on Amazon. The local bicycle shop can’t buy product any cheaper than the consumer.

In the late 1980s, very few businesses were computerized. When the fax machine and personal computer came on the scene, many people mused that the work week would be cut to four days due to the increase in daily productivity. Little did we understand that nothing could be further from the truth. Technology caused such a tremendous increase in productivity that the workload increased exponentially. Furthermore, with the advent of laptops, smart stress at work crisis 1phones, texting, the Internet and The Internet of Things, there is an expectation of 24/7 awareness, and attention to any issue that arises.

What can we do now?

Recognize Crisis as a Peril™.  In looking at history, we know the rate of change is generally unseen until the crisis overwhelms.  Yesterday’s concerns are not tomorrow’s. What keeps you up at night? Is it a traditional insured risk?

Change impacts everyone. Change is constant. Are you too busy today, to plan for tomorrow?

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