The rising demand for cyber insurance is creating significant opportunities for insurers around the world, according to a new IDC report ‘Perspective: Cyber Insurance - Can Technology Help Insurers Overcome Their Skepticism?'
According to IDC, increased digitisation and interconnectivity have catapulted the risk of cyber threats as one of the top global perils of 2016 and beyond. To combat this risk, many companies will look to insurance as a critical risk management technique that complements improved cyber security measures. As such, there are tremendous opportunities for insurers to capitalise on this largely untapped market, effectively penetrating the emerging market while balancing their risk portfolios, IDC says.
According to the analysts, a holistic solution approach that encompasses risk assessment, product innovation, underwriting, and claims management can improve insurers' confidence to write more cyber insurance business.
Currently, insurers are highly sceptical about market penetration and/or expansion due to a variety of reasons. These reasons include, but are not limited to, a lack of historical data for underwriting and a lack of understanding of the cyber risk exposures. As a result, inadequate coverage, high premiums, too many exclusions, restrictions, and uninsurable risks, are typical characteristics of the current cyber insurance products.
According to Sabitha Majukumar, IDC Financial Insights senior research analyst Worldwide Insurance Strategies, says, "We strongly believe insurers should consider the available evolving tools and technologies in the cyber risk exposure monitoring and assessment space."
"These tools will help advance insurers’ ability to manage cyber risk and offer wider coverage against the growing threat of cyberattacks. In doing so, forward thinking insurers can venture into this market better informed about the current customers' and prospects' risk exposure and avoid missing out on a huge market opportunity," she says.
IDC asserts that cyber insurance offers a significant opportunity for insurers across the globe, in an otherwise mature insurance market, and provides the following key recommendations:
- Approach the market with a positive outlook and confidence.
- Leverage the collective support of governments, public bodies, reinsurance firms, brokers, and intermediaries to tackle the current problems around the lack of data and understanding associated with cyber risk exposure.
- Offer innovative coverage based on the intelligence offered by effective risk assessment as this is the current need of businesses across the spectrum.