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Insurers limit millennium bomb losses
Copyright ) 1997 Nando.net
Copyright ) 1997 Scripps Howard
(December 23, 1997 00:36 a.m. EST http://www.nando.net) -- The U.S.
insurance industry has moved to protect itself against losses arising
from the "millennium bomb" by drawing up special exclusion clauses.
The move follows similar action in Britain, where insurance companies
last month decided to exclude such risks from standard policy wordings,
prompting immediate protests from commercial insurance buyers.
The millennium bomb is a problem arising from the inability of some
computer software to distinguish between this century and the next. At
the turn of the millennium, many computers and machines could
malfunction, causing billions of dollars in damage to business.
Insurance regulators in 25 states have approved wordings for general
liability policies excluding any claim for losses related to the failure
of computer systems to recognize dates during 2000 and beyond.
"This kind of problem is not a fortuitous event," said David Oswald of
the Insurance Services Office, which has drawn up the clauses. "There is
no loss experience for this either, so nothing is built into standard
rates. If anybody wants coverage for this, we think it is only proper
that something extra be charged."
For small businesses and retail outlets, the additional cost of securing
cover would probably be minimal, he said. But large multinationals could
face additional expenses running to millions of dollars.
Insurance brokers have criticized the wordings, saying the exclusions
were too broad. Todd Muller, assistant vice-president at the Independent
Insurance Agents of America, said brokers were also concerned that the
standard exclusion clauses were unfairly aimed at smaller businesses,
which did not usually negotiate individual terms.
He compared the latest move with the "excruciating" experience that
followed exclusion of pollution liability several years ago, when
insurers were accused of refusing to cover companies which had no
identifiable exposure to such a risk.
By CHRISTOPHER ADAMS, Scripps Howard News Service
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