March 17, 2016 by Canadian Underwriter
Tremendous opportunities exist for insurers around the world to capitalize on the largely untapped cyber insurance market, a move that could help them balance their risk portfolios and maintain a positive outlook, suggests a report released this week by IDC Financial Insights.
Looking to combat the risk of cyber threats – catapulted to a top global peril by increased digitization and interconnectivity – many companies will look to insurance as a critical risk management technique that complements improved cyber security measures, suggests Perspective: Cyber Insurance — Can Technology Help Insurers Overcome Their Skepticism?
The report offers insights on tremendous opportunities for insurers and outlines some currently available tools and models to help improve insurer confidence and help them penetrate the emerging market, notes a statement from IDC Financial Insights.
International Data Corporation (IDC), a global provider of market intelligence, advisory services and events for the information technology market, asserts that cyber insurance offers an excellent opportunity for insurers across the globe, in an otherwise mature insurance market. That said, a variety of reasons are currently making insurers highly skeptical about market penetration and/or expansion, the statement notes.
Among these reasons are 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,” it adds.
“We strongly believe insurers should consider the available evolving tools and technologies in the cyber risk exposure monitoring and assessment space,” suggests Sabitha Majukumar, senior research analyst, Worldwide Insurance Strategies, for IDC Financial Insights.
“These tools will help advance insurers’ ability to manage cyber risk and offer wider coverage against the growing threat of cyber attacks. 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,” Majukumar contends.
“Based on our analysis, we understand that a holistic solution approach encompassing risk assessment, product innovation, underwriting, and claims management that can improve insurers’ confidence to write more cyber insurance business is yet to emerge,” she notes in a report abstract.
IDC offers the following key recommendations:
“There are not many specialized tools in the market yet that are proven and standardized and can aid insurers in their cyber risk underwriting process,” the abstract points out, but adds there have been some positive developments. These include the following: