Insurance Industry Lagging at Cyber Risk: Report

A new report says the insurance industry’s response to the growing threat of cyber crime has been ‘inadequate,’ and recommends that the industry bolster its expertise in the field.

Crawford and Company’s white paper, “The Future of Cyber Insurance,” says that a lack of data and experience leaves insurers unable “to build an accurate picture of the exposure” and “reluctant to offer broad coverage wording and capacity.”

“With such an unsubstantial commercial insurance market for cyber,” it continues, “some insurance buyers are opting to put these liabilities through their captive insurer – if they have one – or simply retaining the risk on their own balance sheet.” It added that this trend would not likely last, as brokers push the market to develop broader coverage.

Read: Why Your Clients Need Standalone Cyber Coverage

The report emphasized that insurance companies need to recognize the growing cyber threat and boost their ability to respond to it. Because cyber crimes are so complex, “a dialogue between risk managers, information officers, their brokers, insurers ands claims professionals is essential in building a distinct methodology for coping with cyber claims.”

The tough analysis comes as cyber security creeps ever higher in rankings of top risks for the industry. As the report notes, on recent survey put cyber risk in third place “as the emerging risk likely to have the biggest financial impact on global organizations over the next two years.”

A recent KPMG survey of the Canadian insurance industry found that cyber security does not rank very highly, but the report’s authors added that they were surprised by the industry’s relative lack of concern.

Read: Big Data Holds Risks, Opportunities

“While it is entirely possible that a retail chain may recover from an instance of hacking, the bar is most certainly higher for an insurance company where the reputation of the seller of the future promise is so much more important,” the report reads.

The Crawford report also comes hot on the heels of high-profile data breaches at Target and Neiman Marcus; however, the authors note that such attacks are “old news,” and that cyber risks are not limited to such isolated incidents.

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This story was originally published by Canadian Insurance Top Broker.