Category Archives: Internet

Artificial Intelligence, Digital Transformation, Disruption, Fintech, Internet, Privacy, Technology

Should We Press Pause?

Pausing AI development is unnecessary and ignores the underlying issues AI has

“Chris Garrod is a well-respected lawyer, particularly in the fields of fintech, insurtech, blockchain, cryptocurrencies, and initial coin offerings (ICOs) within Bermuda’s legal and regulatory environment. He has garnered a reputation for advising clients on technology-driven businesses and digital assets.”

The above is according to GPT-4, at least.

After Google became the Internet’s prominent search engine in the late 1990s, no doubt you have, at some point, Googled your name to see what might come up. I have a somewhat unique name, so other than seeing myself when Googling, it was interesting to see a Chris Garrod at the University of Nottingham and a company called “Chris Garrod Global,” which provided hotel management services (and they grabbed www.chrisgarrod.com as a domain name, darn-it).

Now, we have AI Chatbots. OpenAI’s ChatGPT, Microsoft’s Bing, and Google’s Bard are the prominent players. Using OpenAI’s latest model, GPT-4 on ChatGPT, I asked: “Is Chris Garrod at Conyers, a well-known lawyer?” 

Hence, the above result. I’ll take it.

AI Chatbots have their benefits. They can lead to cost efficiencies if appropriately used in an organization, freeing up human resources to focus on other matters, for instance.

The potential concerns and limitations of AI Chatbots.

There are various concerns regarding the use of AI Chatbots, and they have their limitations. This piece focuses on ChatGPT because it is the one I use and is wholly language-based.

AI is programmed technology. The root of my biggest concern is that generative AI applications are based on data provided by humans, which means they are only as effective and valuable as those humans programming them, or what – in ChatGPT’s case – it finds while scouring the Internet.  It writes by predicting the next word in the sentence but often produces falsehoods nicknamed “hallucinations.”

As I’ve always said, “What you put in, you get out,” and therein lies the issue. As a result, AI language models will learn from existing data found on the Internet, which is riddled with biases, fear-mongering, and false information, producing discriminatory content and perpetuating stereotypes and harmful beliefs.  For instance, when asked to write software code to check if someone would be a good scientist, ChatGPT mistakenly defined a good scientist as “white” and “male.” Minorities were not mentioned.

ChatGPT has also falsely accused a law professor of sexually harassing one of his students in a case that has highlighted the dangers of AI defaming people.

Further, there is empathy. When we make decisions in our lives, pure emotions are crucial, which ChatGPT (and AI generally) cannot achieve. I want to think that if a client emailed me, they’d get an empathetic response, not one driven by machine learning.  As an attorney, connecting with my clients is a very human-centric matter, and understanding their concerns is essential for me to help them achieve positive outcomes.

We all learn from our experiences and mistakes. We are adaptable, able to learn from what we have done, and adjust our behavior based on what we have learned. While ChatGPT can provide information found on the extensive dataset it has collected, it cannot replicate the human ability to learn and adapt from personal experiences. AI heavily depends on the data it receives, and any gaps in that data will limit its potential for growth and understanding.

A fundamental limitation is simply creativity. Human creativity allows us to produce novel ideas, inventions, and art, pushing the boundaries of what is possible. While ChatGPT can generate creative outputs, it ultimately relies on the data it has found, which limits its ability to create truly original and groundbreaking ideas. A lot of the responses you will receive back from GPT-4, while perhaps accurate, are downright boring.

And yes, there is finally the issue of “What is ChatGPT going to do to my teenager who has been asked to write an essay on Socrates?” Schools, colleges, and universities are in a dilemma regarding how to deal with this technology vis-à-vis their students using it to complete academic work. How can they ban it?  Should they ban it? Can students be taught to use it in a useful way?  The technology is still so new. The answer is “We don’t know,” and it is too early to tell… but AI Chatbots are here to stay.

So where are we heading?

There are a large number of folks who are concerned about the progress of AI, and in particular, AI Chatbots.

On the evening of March 28th, 2023, an open letter was published and – at the time of posting – has been signed by over 14,000 signatories, including Steve Wozniak, Elon Musk, and Tristan Harris of the Center for Humane Technology, stating: “We call on all AI labs to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4.”  You can read it in full here.

The letter mentions this should be done to avoid a “loss of control of our civilization,” amongst other things (bear in mind, Elon Musk once described AI as humanity’s biggest existential threat and far more dangerous than nukes.)

It goes on to ask: “Should we let machines flood our information channels with propaganda and untruth? Should we automate away all the jobs, including the fulfilling ones? Should we develop nonhuman minds that might eventually outnumber, outsmart, obsolete, and replace us?”

Is this really a pause?!?

Although some of the letter makes sense, I was very glad to see that by the end of the week (March 31st, 2023), a group of prominent AI ethicists, Dr. Timnit Gebru, Emily M. Bender, Angelina McMillan-Major, and Margaret Mitchell, wrote and published a counterpoint.  

Timnit Gebru formed the Distributed Artificial Intelligence Research Institute (DAIR) after being fired from Google’s AI Ethics Unit in 2020 when she criticized Google’s approach to both its minority hiring practices and the biases built into its artificial intelligence systems. Margaret Mitchell was fired from Google’s AI Unit soon after, in early 2021. DAIR’s letter can be found here.

Dr. Timnit Gebru c/o www.peopleofcolorintech.com

Their point is simple. “The harms from so-called AI are real and present and follow from the acts of people and corporations deploying automated systems. Regulatory efforts should focus on transparency, accountability, and preventing exploitative labor practices.”

Let’s engage now with the potential problems or harms this technology presents.

“Accountability properly lies not with the artifacts but with their builders,” as stated by the DAIR writers. “AI” is what it stands for – artificial, and it is dependent on the people and corporations building it (those are the ones who we should be afraid of!)

So no, when it comes to AI and ChatGPT, let’s not hit pause. Let’s be sensible. Let’s focus on the now.

AI isn’t humanity’s biggest existential threat unless we let it be.

Chris Garrod, April 6th, 2023

Artificial Intelligence, Bermuda, Blockchain, Digital Transformation, Fintech, Internet, Technology

Insurtech – demystifying the hype

I work in the reinsurance world. Wait don’t leave.

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Specifically, I work in the legal sector, and prior to COVID-19, my attendance at insurance, reinsurance (and tech) related events/conferences felt monthly.

And every single one had one panel (some two) in connection with one particular topic, which they didn’t perhaps a few years ago: the evolution of insurtech.

Insurtech: what is it and where are we now?

So you’re in the insurance industry but live under a rock. What is insurtech?

It is just as the name suggests. The combination of insurance and technology. Or, perhaps more accurately, the rise and use of a wide range of technologies within the insurance industry, from underwriting and claims to administrative functions. What has always been an extremely paper-intensive industry is now gradually dragging itself into the digital age. The disruption of an age-old industry by the onset of a digital revolution.

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Digital transformation. It is what it is. We currently find ourselves in a new industrial revolution — the 4th industrial revolution or “4iR” — though it sounds silly to call it that. As it is anything but industrial. The transformation involves many things: the rise of automation and artificial intelligence within the everyday work process, either replacing employment or enhancing employment, depending on your viewpoint. The use of blockchain technology and smart contracts, simplifying claims management and underwriting processes.

A quick example: Lemonade Inc.

A quick example and one of the poster children of the insurtech movement: Lemonade Inc. Its CEO and co-founder Daniel Schreiber once stated “The insurance brands we know today came of an age in the era of the horse-drawn carriage, but insurance is best when powered by AI and behaviorial economics, which is why we believe that companies built from scratch, on a digital and with a social mission, will enjoy a structural advantage for decades to come.”

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What does Lemonade do? Using a mix of artificial intelligence, behavioral economics, and chatbots, it is able to allow its customers to be able to download and use apps, so rather than liaise with human beings when having to deal with an insurance claim — or employing the use of any insurance broker — their policies are handed automatically. Its most famous claim to fame was its ability to file and pay and claim a claim in three seconds. Plus, a portion of its underwriting profits goes to charity.

At its core, it is digital peer-to-peer insurance, similar to a mutual insurance company, except replacing brokers with AI. It’s primary (current) limitation is that it only really can handle small claims.

Embracing technology

Despite Lemonade’s limitations, as an example of the potential of how technology can disrupt a traditional industry, it is a good one.

So… insurance. Paperwork. Tradition. Regulation. Protection.

Innovation? It is slow to move, but even Lloyd’s is progressing into the world of technology. There are many, many new technologies that are becoming relevant to the insurance world. Blockchain, artificial intelligence and machine learning, big data, robotics, deep learning, healthtech. The internet of things and particularly the use of wearables.

Insurtech can really comprise of a number of things, including insurance vehicles looking to re-invent themselves embracing new technologies, potential new insurers establishing themselves to write insurance in a new innovative way, or simply new ventures that are offering specialized tech products to insurers and other market participants.

A jurisdiction to review: Bermuda

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Bermuda, once called the “insurance laboratory of the world”, and its regulator, the Bermuda Monetary Authority (BMA) has specific insurtech legislation allowing vehicles to enter an insurtech “regulatory sandbox” as well as the provision of an insurtech “Innovation Hub”, promoting insurtech companies to exchange ideas and information with the BMA.

The insurtech sandbox approach is an interesting one, given Bermuda’s size within the global reinsurance world (being the second-largest reinsurance center worldwide). At its core, the sandbox allows for the formation of new insurance (or intermediary) entities, either as brand new start-ups or affiliates of existing insurers. These new companies will, for a period of up to one year (which may possibly be extended), operate using and experimenting with their proposed new technologies and provide their insurance products and services to clients in a controlled environment, under the close scrutiny of the BMA, with the BMA determining what legal and regulatory aspects of the existing legislation should apply to them in order to ensure policyholder protection.

One company has already dived in, AkinovA, which has been licensed as an insurance marketplace provider. The company focuses on cyber risk transfer; allowing sectors of the insurance market to trade in a faster and more efficient marketplace.

Following a year of progress, a Bermuda insurer can be established and “graduate” from the sandbox and become a fully licensed insurer should it wish to do so. These insurers can range from either small claims insurers (a la Lemonade) to full-blown commercial reinsurers. As an example, Nayms Ecosystems Limited has been granted a Digital Asset Business and an Innovative General Business Insurer license (IGB) to allow it to be a Class M (“Modified’) insurer.

The benefits to this approach include various aspects to the proposed entity wanting to enter the sandbox: (1) an opportunity to test its technology before heading into the formal insurance market, (2) allowing it time to work with the BMA as its main regulator to ensure everything being proposed “works”, and (3) helping reduce the cost of regulatory uncertainty a start-up would otherwise face.

As Bermuda’s Premier Burt stated at that time:

“Nayms represents a promising blend of digital assets and insurance, which showcases what the future of insurance looks like.  Bermuda has taken great strides to position itself as an attractive domicile for players like Nayms and it is exciting to see the kinds of new ideas that are being developed.  The ability to create shared digital rules around traditional insurance contracts is a game-changer for the industry.  They allow for increased efficiency and greater market opportunity which ensures Bermuda continues to play a leading role in the insurance-linked securities market.  We look forward to welcoming more innovators like Nayms who are showcasing the way digital assets will reshape the core infrastructure of traditional financial services.”

The future

So, innovation hubs, sandboxes, blockchain, behavioral economics, and AI. Is the reinsurance industry now finally at a tipping point?

There are the naysayers. Innovation hubs are really just means for companies that carry out tech-related activities to liaise with regulators within their jurisdictions. Blockchain-based, self-executing insurance contracts or ones that are done on a peer-to-peer basis using AI are actually pretty dumb and fairly limited to small claims for the time being. And sandboxes will still need a good degree of time to see if they succeed. And the use of a chatbot, robot, or any form of AI can never replace the logic and analytical skills which an actual underwriter or claims analyst will be able to provide. In short, the argument is there that the technology driving insurtech is going to take time, not to mention loads of regulatory requirements which underpin the industry.

But relating to that last point. Wherever we are in the existing insurtech revolutionary curve, for now, the need is there for regulators to both innovate and adjust. And for companies to expand and adjust to take into account the needs of their customers who seek quicker and more efficient service.

Whether you are an insurance vehicle that is competing with others, or an insurance jurisdiction competing against similar ones, we are, like it or not, transforming into a new digital era. Soon, the insurance industry will not be paper-based. And those insurers who fail to realize that will have to do so soon, like it or not.

And finally, to those naysayers who ask me the question: is insurtech for real? When Lemonade Inc’s IPO launched in late June 2020, its share price soared to 132% of its trading value, raising $319 million, and was valued at $2.1 bn in its 2019 funding round.

Yes, insurtech is real. Very real.

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Creator: Nicole Pereira | Credit: NYSE

[Authors note: This article was initially published in April 2018]

Chris Garrod – February 2021

Banking, Bermuda, Blockchain, Cryptocurrency, Digital Transformation, Fintech, Internet, Technology

Bermuda’s Digital Asset Revolution

It’s called The Digital Asset Business Act 2018, which doesn’t really sound that interesting, I suppose.

But, yes, it is.

The Act introduced the concept of digital asset businesses setting up and being regulated in Bermuda. Creating a new regulatory approach, while also one which is very much founded on the Island’s existing, successful (re)insurance industry.

Basically, the Act is trying to achieve what the Island’s Insurance Act did in 1978: the establishment of an entirely new sector of Bermuda’s economy. One which is regulated by the Island’s prime regulator, the Bermuda Monetary Authority.

An industry which over time will become a new “economic pillar” for the Island. A fledgling digital asset industry which may also turn out to be an innovative example for other jurisdictions to follow.

Digital Assets and Digital Business

As a basic summary, digital assets are just assets which are digital. They cannot be used as legal tender; they are meant to be the assets of the person issuing them and they are accessible using virtual ledger technology (i.e. blockchain).

As set out in the Act, “digital asset businesses” will do the following:

  • issue, sell or redeem any kind of digital asset (anyone issuing digital assets or allow customers to redeem their digital assets into cash);
  • be a payment service provider including using digital assets to transfer funds;
  • operate an electronic exchange (Coinbase, Krakken, Bittrex, Binance are examples);
  • provide “custodial wallet services” (basically a service provider where they store and maintain “keys” for controlling your digital assets, which is then kept on servers of third party service companies who can then allow you to send, receive and otherwise monitor your digital assets); and
  • be a digital asset service vendors, i.e. someone carrying digital asset transactions for another person or those who are essentially “market makers” — traders of digital assets.

Licensing

Like insurance companies, digital asset businesses are subject to regulation. From an insurance perspective, the Bermuda Monetary Authority (BMA) will always view policyholder protection as being the most important factor when regulating insurance vehicles.

When it comes to digital asset businesses, they look at consumer protection.

This is a whole new ballgame as we are now dealing with digital assets. An entirely new industry. The BMA, like many other global regulators, issued a warning to the public generally about initial coin offerings (ICOs) and the fact that they are not subject to regulation. Bermuda’s own Initial Coin Offering legislation came into effect in May 2018, requiring ICOs to apply for their offerings to be approved by the Island’s Ministry of Finance.

The Digital Asset Business Act, which came into force in June 2018, is focused entirely on actual digital asset businesses and not ICOs. These businesses which operate in or from within Bermuda absolutely must be regulated.

There are two separate classes of license which the BMA can issue:

  • a Class M license: one which can carry on activities for a defined period. To date, one company, Omega One Bermuda Ltd., has been issued a six month Class M license to act as an exchange and a custodial wallet service provider; and
  • a Class F license: one which can carry on all of the activities as described above. To date, none have been issued such a license.

The BMA has to be cautious. Rightly so. The Act was drafted based on a mix of the Insurance Act provisions as well as existing FATF recommendations. Similar to the Insurance Act, there are head office requirements, broad intervention and disciplinary measures given to the BMA, and also provisions to notify the BMA regarding matters such as license breaches, material changes of business, etc.

The application process is also quite similar. A business plan needs to be filed with the BMA which focuses on how consumers will ultimately be protected — e.g. cyber security details, risk management functions, insolvency mitigation and more than anything else, an overview of how the applicant’s Anti-Money Laundering and Anti-Terrorism Financing policies will be implemented. AML and Know-Your-Customer requirements are absolutely key in this very nascent digital asset business world.

The BMA has drafted a proposed Code of Practice which the regulator will expect digital asset businesses to follow (similar to the Code of Conduct which insurance companies also must meet). The requirements are detailed and include matters such as requiring all digital businesses to have IT security awareness training, monitoring key storage, data sanitation requirements…. the list is lengthy.

In short, Bermuda’s licensing requirements show that it is not moving lightly into the world of digital asset business. Bermuda wants to be at the forefront of a new industry, but it wants to do so in such a way to ensure its reputation remains intact.

Looking Forward

So what next?

Crypto banking. The gates have been opened and the Bermuda Government has also amended the Island’s banking legislation to allow both digital asset businesses as well as digital asset or security token issuers to do business in the Island, with the prospect of potential “crypto friendly” banks to form at some point in the future.

Digitised Banking / E-IDs. Although nothing has been formally implemented, there has been much talk regarding the introduction of a national electronic ID platform or e-ED. It would be hard to imagine that prior to the end of 2019, the Bermuda Government in co-operation with other private industry players does not implement such a service.

Cyber-insurance. Bearing in mind Bermuda being an existing insurance and reinsurance market leader and also taking into account the increasing threats represented by cyber criminals which must be handled by insurers, it feels inevitable that heading further into 2019 Bermuda will be at the forefront leading the way to address these concerns.

Looking Back?

A year and a half ago, in November 2017, the Bermuda Government, the Bermuda Business Development Agency, certain OECD experts and various sectors of Bermuda’s private industry came together, as stated by Premier Burt: to create a “bring new business to the Island, help boost GDP and create meaningful jobs, while helping to prepare our financial system and economy for the future.”

A lot has happened since then, with much more on the horizon. Bermuda appears certainly to be looking forward and not back.

Chris Garrod, April 2019

Apple, Artificial Intelligence, Blockchain, Digital Transformation, Internet, Internet of Things, Technology

The Internet of Things is taking over your life.

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On February 9th, 2018, Apple suddenly woke up and finally released the HomePod.

What is it?  It plays music and, assuming your house and all its gadgets are connected using Apple’s HomeKit ecosystem, it will let you control them via Apple’s intelligent assistant, Siri. It can tell you what the weather or news will be, and it will answer (possibly) whatever other random questions you think of. It can turn off your lights or air-conditioning. And other…. stuff.

If you have an iPhone, you’ll know what Siri is – basically say “Hey Siri, play XYZ” and then pray what the results might be. There are other competitors to HomePod already, primarily Amazon’s Echo, which is powered by its Alexa voice assistant and Google Home which uses Google Assistant.

We live in an IoT world

The Internet of Things or IoT.  If you don’t really know what that means, I can assure you, it is revolutionizing your life and the way you live, even if you don’t realise it.

Do you have a smartphone? A fitness wearable such as a FitBit or an Apple Watch?  If so, you’re part of the Internet of Things, a term – perhaps badly named – which simply refers to the ability of devices which are connected over the internet, all contributing information from each other into some form of database for a particular reason.  

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Using a fitness wearable as a simple example. You wear it. It measures your steps, how many floors you’ve climbed, how much you sleep.  Depending on your activity or willingness to lose weight, you may log how much you eat each day into a program which is connected to your wearable’s smartphone app. You may run and have a special heart-rate strap if your wearable doesn’t already measure it. You may even have a Bluetooth connected scale which logs your weight and that information is then absorbed into the same database. That information can get posted online somewhere onto a social media network where you can compete with your friends. All of those devices talk to each other and combine into one database over the internet which has been specifically designed for basically one thing – improving and monitoring your health and fitness.  

So, the IoT.  Perhaps you’ll have a fridge that will let you know on your smartphone when you need to replace items which have spoiled and send an alert to you when you are grocery shopping. Wait, you don’t already?  Go back two years.

Companies in various industries are devoting a large amount of resources and money to invest in IoT technology, so much so that it has become mainstream in many sectors, such as manufacturing and transportation.

In essence, it is the process of digital transformation – that is to say, transforming the physical world into one big digital one.

The beauty of it all

Other than smart fridges and fitness trackers, there are so many new products and innovations, it is impossible to summarise them all here. Yes, people joke about smart toasters and coffee machines but the IoT certainly makes everyone’s lives genuinely smarter and easier.  

Right now, the smart home industry is the nexus of the industry and where it is all happening.  Companies across the globe are positioning themselves and trying to takeover this portion of the market.  Companies like Samsung, Lutron, Nest and Honeywell have been in the market for years, to be joined by groups such as Amazon, Google and now Apple, the latter three simply creating hubs/voice assistants which interface with actual automation systems (such as Lutron or Honeywell).  Smart homes can be programmed so that airconditioning can come on at certain times of the day to cool/heat your home before you get home or lighting to come on at certain times. Voice assistants can read the news to you in the morning or play music, change tracks, volume etc while driving.  And yes, coffee can be made for you.

But the Internet of Things isn’t limited to just home automation. It is worldwide connectivity.  People to people, people to things and, of course, things to things.

Waze, the driving app is a great example of the IoT.  As described on their website, Waze “is powered and used by drivers all over the world. Drivers connect to one another and work together to improve each others driving experience. As a community-based traffic and navigation app, Waze was created as a social navigation tool for private cars.”  It is a social app – you plug into the app where you are, where you are going and, using GPS and it being able to then work out your location, how fast or slow you are moving, etc, it will send out alerts regarding how heavy or light the traffic is to others travelling the same route.  It is smart, growing smarter the more people use it, has very few limitations and is exactly how to run an IoT business.

Smart Cities

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Dubai is a good example of where things may ultimately be heading.  Smart cities are those that in the future use the IoT effectively and efficiently to manage both assets and resources.  For example, the ability to improve a city’s energy use, its public transport, security, reduction of waste. With one of the highest penetration rates of smartphone usages in the world, Dubai’s ambition isn’t just to be a model smart city with government services being delivered to its citizens digitally, but its ambition is to be “the happiest city on earth” as a result of it. A public/private collaboration, it wishes to deliver over 1,000 “smart services” by 2021.   Interestingly, though not surprisingly, as part of that strategy, Dubai also aims to have the world’s first “blockchain-powered government”, one which entirely stores its data in its own secure, decentralised digital blockchain network.  

The future of IoT

So, we are increasingly becoming connected and eventually we will live in cities which are also digitally operated. Virtually endless opportunities are possible, many of which we have yet to comprend or consider.  

But there are challenges and the two main issues which the average person faces being part of a such a connected network are privacy and security.

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Although we are not quite yet heading towards some kind of Orwellian dystopia, one can see the pressures upon basic privacy and concerns regarding the security of information which IoT presents. Being part of it, you are basically giving up a lot of personal information to third parties. What TV shows you watch, your spending habits, how often you walk, what you weigh, are you married, do you have kids, what your potential income is…. the list goes on. The question to ask is that by giving up that information, will that data stay private and will companies ensure it is secure? By opening up your home and the ability to control your coffee machine from your bed, are you also inadvertently exposing your entire network to third party hackers, and all of your personal information?  The ways companies are able to securely and responsibly store the information they obtain from users are critical matters which must be dealt with in the IoT world.

But the excitement really is now coming to a head.  With the onset of the “fourth industrial revolution” and the seeping of IoT, artificial intelligence, automation, blockchain, robotics, big data and machine learning into both work and home, we are now well beyond the tipping point: digital transformation will be the driving force of our lives for years to come.

So the HomePod has just come out.  The Amazon Echo came out in 2015.  The Google Home in late 2016.  It feels like Apple is really late to a party.  But actually, they’re not, and that’s because the party is really just beginning.

Chris Garrod – February 14, 2018