PwC: By 2030, cyber insurance premiums set to increase by US$5 billion
FOR A BUSINESS to survive, let alone thrive, insurance ought to be amongst the first few chapters of their strategy playbook.
Thus, in today’s often disrupted, high-risk digital landscape, cyber insurance is a must-have.
An increasing number of businesses are beginning to recognize the cruciality of obtaining cyber insurance: experts predict that by 2030, the annual gross written premium will increase by 200 percent, from around US$2.5 billion to US$7.5 billion.
However, much skepticism still looms over cyber insurance. Cyber risks aren’t like ‘traditional’ risks: Publicly available data is limited, and threats are rapidly proliferating.
Hence, it is key that insurers themselves have a holistic understanding of the current landscape, to make strategic decisions.
# 1 | How severe are cyber risks?
According to a report by PwC, more than 50 percent of insurance CEOs (71 percent), banking CEOs (79 percent), and other industry leaders (61 percent) see cyberattacks as a major threat, ranking it higher than shifts in consumer behavior, or speed of technological change.
The financial impact also gets heavier with size: Cybersecurity incidents can easily cost ‘large’ organizations up to US$2 million in losses.
As businesses get increasingly connected, breaches have a cascading impact-it will not only affect one company’s data or system, but also those of their customers and strategic partners.
Cyberattacks can also go undetected for long periods of time, opening up the possibility of accumulated losses down the line.
# 2 | What concerns policyholders?
Cyber insurance is costly. A limited number of insurers offer coverage and there is much uncertainty on how much to set apart for potential losses.
Insurers are also setting limits below the client’s expectations (the maximum is US$500 million, but large companies often get no more than US$300 million). Clients, too, are frequently faced with restrictive conditions, such as cutting edge data encryption, which is expensive to maintain.
All the above give policyholders a reason to doubt if their policies are delivering real value, and this might stunt market growth in the long run.
# 3 | What are the next steps?
Investing in your workforce is key.
Take pricing for example. It is impossible to obtain accurate pricing due to data shortage, but the right talent can help insurers gauge their total loss and better match it against risk tolerance and appetite.
Collaboration is also crucial-insurers need to work with various intelligence agencies to develop effective threat assessments. This extends to the client, who, through sharing data, can help insurers develop better pricing accuracy.
Also, insurers cannot be complacent-they must constantly update policies to support the needs of businesses.
Relevant safeguards must always be present, and insurers should constantly invest in their own cybersecurity, especially given the volume of sensitive information they hold.
Ultimately, it all boils down to recognizing the urgency, listening to clients, and being proactive and open to change.
Focus on these three aspects, and insurers can be sure that they are one step closer to reaping maximum benefits from this largely untapped market.