- TOKYO (Reuters) - Many Japanese insurers are trying to make it clear they do
not feel obligated to make payouts on accidents triggered by computer software
failures that may take place on the first day of the year 2000.
- Some say the potential risks of ``millenium
bugs'' are too big for them to take. The problem seems simple. Because
many older computers worldwide recognise a year by a two-digit number,
``98'' for 1998 for example, they could confuse the year 2000 with 1900,
both represented as ``00.''
- Such computers, not being ``millenium
compliant,'' could suddenly lose track of time at midnight on December
31, 1999. Some could stop functioning. Others might miscalculate data.
The repercussions could be significant, involving computer chips now used
in everything from jumbo jets and nuclear power plants to answering machines
- Insurers, trying to sort out where risks
exist and how to cope with them, say many businesses will be affected.
An aircraft with a suddenly malfunctioning computer could lose its bearings.
A failure of air traffic control computers could make it worse. Indeed,
the U.S. General Accounting Office has reported that the Federal Aviation
Administration is behind schedule in fixing its computers, including those
handling air traffic control.
- A warehouse with computerised air conditioning
might fail to keep frozen foods at appropriate temperatures. Such problems
would cause other sorts of headaches as well. There would likely follow
a sharp rise in litigation, with various parties blaming each other for
economic losses, insurers said. Are insurers obligated to pay for losses
caused by these millennium-based computer failures? Many say: ``Basically,
no.'' ``Insurance is to cover unforeseeable damages and losses. The millennium
bug has been known for some time, so most of the problems could hardly
be seen as insurance-covered accidents,'' one insurer said.
- They also claim it is extremely difficult
to calculate the risk involved with the bug because it is a one-off event
with which they have no experience, rather than accidents such as fires
that occur at a certain probability over the long term. Some insurers said
they are already excluded from making payouts without any changes in their
contracts because the problem is expected, even predicted, rather than
- But Kazuto Baba, general manager of the
Marine Department at Yasuda Fire & Marine Insurance Co Ltd, said: ``At
present, for instance, many marine insurance contracts cover all accidents
regardless of reason. So, with the contracts we have now, even if a ship
gets stranded because its computer does not work properly, we cannot exclude
- Baba, who said his company is studying
the insertion of an exclusion clause into its contracts, said: ``If a plane
crashes, it is difficult to single out a specific cause and prove it.''
The fact that most non-life insurance contracts are renewed yearly sets
the deadline for insurance companies to find answers by the end of this
year at the latest, they said. Their worries may not disappear even then,
however, because nobody fully comprehends the scale of what might happen
to computers around the world until the day comes. ``I fear I may not have
a normal holiday on New Year's Day in 2000,'' one insurer said.