SIGHTINGS


 
Wary Japanese Fear
Millenium Computer Bug
By Hideyuki Sano
2-23-98


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 and televisions.
 
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 accidental.
 
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 it.''
 
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.


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