Big Brother (or Sister) Is Always Listening

Alexa had a good show. She was everywhere at CES with 35 new embedded product introductions, from cars to refrigerators to robots to vacuum cleaners. Google Home chose the more luxurious path by partnering with Mercedes and Sony. While consumers love talking to their devices, no one has ever asked Alexa if she enjoys listening to our every whim, burp, and gossip?

AI assistants, like Alexa, are causing new legal and privacy issues that attorneys are just beginning to grapple and understand. Because Alexa’s mic is always on, waiting at the beck-and-call for a request, it could be continuously recording and sending information to the Cloud. This unintended outcome has now opened a pandora box of privacy rights, law enforcement warrants, and insurance claims.

Could an AI or social robot be the key witness to a crime? Well, the Arkansas police think so. In 2015, a Bentonville man was found murdered in the home of James Andrew Bates. The suspect, Bates, has several internet-connected devices in his home, including a Nest thermostat, Honeywell alarm system, and the key witness in the case – Alexa.


The police quickly demanded that Amazon turn over Alexa’s sound/recording files from Bates’ home on the night of the murder. However, Amazon has so far declined to hand over information in the case, according to court records, and the company says it will not be releasing customer information “without a valid and binding legal demand properly served on us. Amazon objects to over broad or otherwise inappropriate demands as a matter of course.” The district attorney still seized Bates’ Amazon Echo as material evidence in the case.

This appears to be a first-of-its-kind case, however we are sure to see many more of these types of legal conundrums in the future. According to my friend Jules Polonetsky, the CEO of the Future of Privacy Forum, the Arkansas case “is an important wake-up call, because it shows that people are really ready to get very upset if they think they are being spied on.” Speaking on CNBC last week Jules advocated for self-regulation within the tech community whereby the device would blink or light up when it is actually recording. “It’s a good reminder here to companies that they need to be mindful of only collecting what most of us want collected, which is our actual commands and directions,” Polonetsky said, adding that “there will be a real privacy scare when the real ‘always-on’ devices, such as the remote video cams and Wi-Fi connected baby monitors and the like, become more prevalent.” I need to invite Jules to meet Pepper and Lynx.

A 2015 Gartner study estimated that consumers worldwide are buying 5.5 million smart devices daily, as product companies are responding by creating even more innovative connected features. Last week, General Electric announced a futuristic lamp that integrates Alexa, while Whirlpool showcased Alexa-enabled washers and dryers. Even the Wynn Hotel got into the act by announcing that all of its 4,748 hotel rooms in Las Vegas will be enabled with Alexa. This really tests the premise ‘of what happens in Vegas stays in Vegas.’

In the words of Steve Wynn, Chairman and CEO of Wynn Resorts. “The thing that Amazon has done with Alexa is quite perfect.  If I have ever seen anything in my 49 years of developing resorts that has made our job of delivering a perfect experience to our guests easier and help us get to another level, it is Alexa.  The ability to talk to your room is effortlessly convenient. In partnership with Amazon, becoming the first resort in the world in which guests can verbally control every aspect of lighting, temperature and the audio-visual components of a hotel room is yet another example of our leadership in the world of technology for the benefit of all of our guests.”

Insurers across the U.S. are offering incentives to install devices like Alexa with one of half a dozen other connected devices, ranging from moisture sensors to video doorbells. State Farm is currently promoting a discount on your home policy for installing a Canary home security monitor  and Liberty Mutual will send you a Nest Protect smoke detector free of charge to cut the cost of fire coverage.


Jon-Michael Kowall, assistant vice president of innovation at USAA, says he’s aiming to create something like a “check-engine light for the home. In the near future, you’ll give us a mailing address and we will send a box of technology to you. What’s in the box will prevent claims and also offer a better service to policy holders.”

The increased ubiquity of these AI and robotic devices means that not only can they be used by the good guys, but manipulated by the criminals as well. For example, data can assist burglaries by reporting when you are home. Ransomware could turn off the heat until a homeowner pays up. According to tech maven Shelly Palmer, we need to prepare for the looming doom as “anything that can be hacked will be hacked. Anyone who believes otherwise is simply naïve.”

There has been a lot of news about Russia hacking the Presidential election, but a bigger cyber event happened this past October when the internet throughout the USA was hit with a malware virus that caused widespread a Denial of Service. According to the Department of Homeland Security, the malware specifically targeted internet of things devices, in addition to popular social media sites like Twitter and Facebook. The National Cybersecurity and Communications Integration center is now working overtime with law enforcement, the private sector, and the research community to develop ways to mitigate risks from future malware attacks.

Cybersecurity is “a rising concern as more and more products move to an online environment,” said Gamelah Palagonia, senior vice president for the cyber and errors and omissions insurance teams of Willis Towers Watson P.L.C. in New York. “There needs to be a blending of the policy forms for the kind of losses than can be expected in the future.” In July, American International Group Inc. introduced CyberEdge Plus, a stand-alone policy designed to provide primary insurance protection for a broad range of cyber risks including property damage, bodily injury, business interruption and product liability.

“We need to build cyber-specific solutions where we’re combining traditional cyber coverages with traditional property/casualty coverage, where we’re coming up with a single perils solution” where the peril is a cyber attack, said Zach Scheublein, New York-based based vice president with Aon Risk Solutions’ financial services group. It is going to “take little bit of time to see the evolution of this particular risk transfer solution,” said Mr. Scheublein. Traditional property underwriters and traditional cyber underwriters all have their own underwriting appetites “and it’s a matter of getting those two silos cooperating and coming up with better solutions in the marketplace,” he said.


The market for autonomous devices is evolving, and the liability issue is starting to move to the forefront of policy decisions. Yesterday, the European Parliament voted in favor of granting legal status to robots. According to the report (approved by 17-2 with 2 abstentions),  “the most sophisticated autonomous robots could be established as having the status of electronic persons with specific rights and obligations, including that of making good any damage they may cause.” AI developers,  roboticists, and autonomous car manufacturers be forewarned…

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