While the insurance industry is effective at dealing with standard crises, it is less comfortable with cyber crime, despite its growth, scale and possible wider impact. However, not only do we need an industry that can correct or compensate for cyber breaches; cyber crime and cyber security are providing insurers with opportunities for growth. CyNation’s Insurance Business Director Silvi Wompa Sinclair looks at the industry’s burning issues.
As Silvi (right) explains: “The first burning issue is the fact that the area of cyber crime / cyber security is one of the few areas of growth in the insurance industry for a decade – if not longer. The insurance industry is not known for growth or innovation from within, but this is one of the few areas where the industry has actually developed.
“And because it is so rare as a growth opportunity, many people want to get involved. This is great, but at the same time this is a very, very different type of risk exposure compared with what most of the insurance industry has been doing for the past 300 years.
“How it differs is in terms of where the exposures come from. It differs in terms of how it can be modelled, because there is not very much information as yet. And basically it is an area that can’t easily be pinned down, because the criminals tend to move faster than the industry and technology moves faster than what any actuary or underwriter or broker can really fathom.
“A related issue that comes with this growth is: do people – especially within the insurance companies – really know what kind of risk they are taking on? Because ultimately that comes back to the client – the insured company or person – who may think: ‘I have this cover (in the form of an insurance policy), but if there is a massive data breach am I really covered for what I think I am? Also, if there is a massive data breach, I won’t be the only one affected.’
“An additional question might be: if there is a mass effect, will my insurer be able to cover this? If it’s a market phenomenon, they might run out of money. And if this is a type of breach that hasn’t been seen before, will it be covered? It may not be part of the wording, or the terms and conditions. Is there a possibility that the insurer may say: ‘hang on. We are not covering that because we didn’t see it coming’?
“The opportunities for growth – as well as the dark side of that growth – are two key matters for the industry.”
Look out for more insurance insights from Silvi.