The cost of sorting out the problem could be pounds 30bn in the UK alone. Some estimates suggest up to 10 per cent of companies could be bankrupted in the process. It's all because of a decision made decades ago to save space on computer memory. Millions of machines only use the last two digits of a date. In the year 2000, uncorrected machines will be unable to tell what year it is: to a computer, 00 could be 1900.
But the crux of the problem lies with embedded chips - the computer processors which give time signals for everything from domestic appliances to anti- lock breaking devices in cars.
Consider the effect that embedded systems could have on your personal finances. It won't matter how well your insurance company has prepared if your financial adviser has neglected to update his or her IT software. One missing link in the chain could have far-reaching consequences.
Insurance is one area where consumers are likely to lose out. The Association of British Insurers (ABI) has recently issued a guide on what will and will not be covered by our insurance policies. "The Millennium - What Does it Mean for Me?" explains that losses which occur as a direct result of the millennium will not be insured, since it is a predictable and foreseeable event. However, if the problem has a knock-on effect, the damage may be covered.
For example, if you jet off abroad at the turn of the century, delays or cancellations are unlikely to be covered. But if baggage is stolen during the delay, your travel insurance policy should cover it.
All your household appliances should be free of bug problems, according to the ABI. Manufacturers say that microwaves, garage doors, central heating and cars should be working with no problems on 1 January 2000. The sticking points could be your PC, burglar alarm, VCR or camcorder. A few fax models will fail to recognise the date change. An ABI booklet tells you what to do now to prevent problems later.
The real cost will be to big business. The ABI has also launched a new service which gives fund managers the opportunity to check awareness of year 2000 issues among FT-SE All Share companies. A survey of these firms was carried out over the summer and the results indicate that a substantial number of them are tackling the millennium problem.
The ABI is not the only organisation working to safeguard the consumer's financial security. Action 2000 was set up by the Government last year to advise the private sector on the millennium bug.
Gwynneth Flowers, managing director, says the year 2000 bug will not have a serious impact on our finances. "There will be instances, but they will be short term and have a local impact, like traffic lights failing. Life as we know it will go on," she comments.
Ms Flowers is sure our money will still be safe in the banks. Even though there is currently no government legislation that demands companies declare their millennium-readiness, the UK financial services industry is taking the problem seriously.
Helen Nugent writes for 'Health Insurance' magazine.
find out more: useful contacts
For a free copy of "The Millennium - What Does it Mean for Me?" write, enclosing SAE, to: Consumer Information Department, Association of British Insurers, 51 Gresham Street, London EC2V 7HQ. Website: http://www.abi.org.uk
To see information on the state of readiness of companies in the FT- SE All Share listing, go to The Institutional Voting Information Service (IVIS) at www.ivis.computasoft.com.
Action 2000 Hotline: 0845-601 2000, or www.bug2000.co.uk
The Consumers' Association has a website dedicated to millennium bug information: www.which.net
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