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Insurers and product safety

BIScom Subsection: 
Author: 
Nigel Morris-Cotterill

The Takata airbag scandal raises important questions for insurers in this and other cases of recall. And how Big Data can be used for good.

Insurance is a game of risk.

Insurers assess the likelihood of an event happening and charge a fee to provide a specified benefit if that event does, in fact occur. They limit their liability in a number of ways, including refusing to take the risk, refusing to take part of the risk or incorporating clauses that say that they will not be liable in the event of a person having willingly or recklessly taken that risk.

Say, for example, that someone rides pillion on a motorcycle without protective equipment and is injured in an crash that is the rider's fault. If the passenger sues the rider, the rider would be entitled to argue volenti non fit unjuria which loosely translated means "he who volunteers cannot complain of injury." That would certainly be the stance of the rider's insurance company if it takes over the rider's defence.

However, what of a car driver who is injured in a crash because of a defective airbag? We know from cases involving e.g. defective brakes that the manufacturer can, for a period after manufacture, be held liable. But, and this is a huge "but," what if the manufacturer had taken all reasonable steps to identify the owners of the cars concerned and fix the problem at no cost to the car owner? This is the essence of a recall. What if the owner had actual or constructive notice that there was a recall but had failed to go?

In the Takata airbag case, there are hundreds of thousands, perhaps even millions, of vehicles in use with airbags that are marked in various stages of seriousness (the most serious being "critical") that remain unfixed more than two years after the recalls started. Takata is broke, out of business and broken up so it is no longer an effective long-stop in the case of litigation, or to be more precise will not be once its long-tail product liability insurance runs out.

That leaves the vehicle manufacturers on the hook but surely there must come a time when manufacturers can say "look, short of going and nicking the cars out of people's garages to perform the work, there really is nothing more that we can do." As reported elsewhere in this newspaper today, Australia is moving towards that position see article although it might not want to actually get there.

This raises the question of whether insurance companies can, even should, intervene in the interests of consumers, society and, of course, their own shareholders. The vehicles for which a recall is required are identified by publicly available data which insurance companies also have: VIN numbers, make and model of vehicle. And so, insurance companies can easily check if vehicles that they insure, or in respect of which they receive a proposal, is listed for recall. If so, in the absence of proof of remedy, they can refuse insurance or renewal under a clause which will say something like "the policyholder shall maintain the vehicle in a safe condition." Licensing authorities have the same data on the vehicle registration documents and access to the same public recall data. They can refuse a renewal of a vehicle licence unless there is evidence of remedy.

In each case, the manufacturers have a list of those vehicles which have had remedial work done: that list could be made available to insurers and licensing authorities so that individual vehicles can be checked against the register. Indeed, such a register should, arguably, be public so that purchasers of the vehicles can ensure that remedial work has been undertaken.

It's not rocket science, it's not technical - it's not even really Big Data: it's risk management using simple database queries so that there are less injuries or even deaths (as Australia's consumer body ACCC says is a real danger) and less cost to vehicle and medical insurers / state medical care.

With almost half a million affected vehicles in the airbag recall in Australia alone, and with other recalls affecting vehicles all over the world for a wide range of safety related issues, it's a simple, inexpensive means of compelling owners to get the work done.

 


 

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