Nanotechnology – is it insurable?Author : Karen Jones, Dominic Flannery
Have you heard of the term nanoparticle? In Part Two of our exclusive series with ANZIIF: ‘How Advances in Medical Technology Are Impacting Insurance’, we tackle the unknown and unpredictable outcomes associated with the use of nanotechnology; especially given new possibilities for its use in food additives and the medical arena.
It may sound like something from a science fiction movie, however did you know that nanoparticles are used in everyday life? From the gum you chew, through to the zinc in sunscreen, to protective coatings on fabric and the ‘ink’ from some 3D printers, the practical uses of nanoparticles are abundant.
In fact the use of nanoparticles is on the rise. Globally, it is reported that there are approximately 2000 products containing nanoparticles, 20 of which were developed in Australia.
What exactly is a nanoparticle?
Put simply, “nano” is a measurement term, which means “one billionth”. A nanoparticle extracted from a material is undetectable to the human eye, even under a microscope, and has powerful and unique qualities to that at its ordinary scale.
There is currently a lot of investment and conjecture about the possibilities for nanoparticles to be used in technological development – particularly in the medical context for the diagnosis and treatment of cancer.
The application of nanoparticles in this context is called nanotechnology.
Nanotechnology, risk and the insurance industry
Since commercialisation of nanotechnology began in the early 2000s, the insurance industry has monitored its development, wary of its risks and excited about its benefits. In Australia, the Insurance Council of Australia participates in the Nanotechnology Technology Committee of Standards Australia with the aim to develop standards to “support improvement in quality, safety, security, consumer and environmental protection, together with the rational use of natural resources in the context of nanotechnologies.”
Despite these precautions, the breadth of nanotechnology’s infiltration into everyday life continues to surprise, with recent findings revealing that even Australian regulators were unaware of its reach.
To illustrate, in January this year, a food additive containing nanoparticles was placed under review following a study showed it initiated the early stages of cancers in animal. As more incidents like this occur, there is a growing concern that more may need to be done to monitor and regulate the nanotechnology industry, both from a safety perspective and in relation to insuring the risks it poses.
A new approach to cancer diagnosis and treatment
Even though the jury is still out on the safety of nanoparticles, the medical community believe this technology may hold the key for successful treatment of cancer and other conditions. Clinical trials have commenced for a number of medicinal applications, from diagnosis, using MRI visible nanoparticles that bind to newly formed blood vessels associated with early tumour development, to treatment, using nanoparticles to stimulate the immune system, identify best treatment or target key enzymes within cancer cells.
There are also a number of ‘nanoparticles’ that have received approval from the Therapeutic Goods Administration for use in Australia, such as liposomes and proteins used to treat cancer and other conditions.
Despite the medical view, an alternative view is also held that there may be hidden dangers associated with nanotechnology, which may lead to a new wave of toxic tort litigation. Whether this is justified is difficult to evaluate at this time. Much of this technology is within the trial phase and, in any event, it is too early to determine the long-term effects and impacts associated with exposure.
Accordingly, while nanotechnology might hold the key to curing cancer, the importance of proper testing and regulation, especially with respect to substances that will be inserted into the human body, cannot be underestimated.
The insurance industry’s response
The tracking of new and emerging risks is a core part of the insurance industry and the wording of most existing insurance policies, across many types of insurance, is already broad enough to cover the risks associated with nanotechnology. With the risks covered but the extent and frequency of any losses still an unknown, insurers are concerned about how this will affect their bottom line.
In response, we have seen insurance products developed that combine coverage with risk management services to educate and assist insureds, as well as insurers’ increased participation with standards authorities.
So is nanotechnology insurable?
There is little doubt that nanotechnology is insurable. However, the unknown and unpredictable outcomes associated with the use of nanotechnology may result in claims that exceed the limit of liability of certain policies and do not fit within certain defined terms, which may result in uninsured or underinsured events.
For instance, consider the recent discovery discussed earlier regarding a food additive commonly used in everyday supermarket items like chewing gum, sauces and lollies, being found to be carcinogenic to animals. Using that example as the baseline for a hypothetical situation, imagine a food additive containing nanoparticles is found to cause cancer in humans, three years after it was first sold.
The maker of the food additive may have had a product liability policy to cover product recalls and personal injury as a result of the use of the additive, however, after three years of sales in supermarkets around Australia, hundreds of thousands of people (at a minimum) would be affected or at the very least concerned about their welfare.
Among other considerations, the maker of the food additive would need to:
- recall all products containing the additive from supermarkets around Australia;
- recall products sold to hundreds of thousands of consumers over a 3 year period including by way of advertising and investigation; and
- potentially provide compensation for hundreds of thousands of affected consumers or at the very least consider and respond to their claims or concerns.
In this example, the delayed manifestation of the risks associated with nanoparticles greatly enhances the sheer scale of the risk, and would test the limit of liability under the policy. As well as affecting the insurer’s bottom line, it may result in a significant uninsured portion.
While the above scenario is hypothetical, it provides a useful framework for both insurers and insureds in respect to insuring products involving nanotechnology:
- ensure full disclosure regarding all products using nanoparticles is made at the policy inception and as and when they are used during the course of the policy period; and
- consider the type of risk and its breadth, and whether this is covered by an existing policy, whether the policy needs to be changed to match the risk or whether multiple policies are required.
It is important for insurers, brokers, underwriters and insureds to understand the risks and benefits of nanotechnology to ensure the right insurance cover is provided. See for instance Swiss Re’s Nanotechnology: Small Matter, Many Unknowns (2004), Lloyd’s Emerging Risk Team Report: Nanotechnology Recent Developments, Risks and Opportunities (2007) and Zurich Financial Services Group’s Industry Insight: Insight on Nanotechnology (2009).  http://www.standards.org.au/StandardsDevelopment/Pages/Nanotechnology.aspx  http://www.smh.com.au/business/retail/nanotechnology-found-in-popular-foods-despite-repeated-denials-by-regulator-20150916-gjnqgj.html  http://www.smh.com.au/business/consumer-affairs/titanium-dioxide-food-additive-under-review-after-study-finds-cancer-links-20170127-gu03ao  https://nano.cancer.gov/learn/now/clinical-trials.asp  https://nano.cancer.gov/learn/now/clinical-trials.asp  https://www.tga.gov.au/tga-presentation-nanoparticle-therapeutics-2016-20-october-2016  Chartis press release 30 March 2010: Lexington Insurance Company Introduces LexNanoShield SM  Such as the Insurance Council of Australia’s participation in the Nanotechnology Technology Committee of Standards Australia.  http://www.smh.com.au/business/consumer-affairs/titanium-dioxide-food-additive-under-review-after-study-finds-cancer-links-20170127-gu03ao