A new report from Allianz Global Corporate & Specialty says cyber attacks cost the global economy $445 billion annually. And $200 billion of that comes from the world’s biggest economies the United States, China, Japan and Germany with $108 billion of that figure coming from the U.S.
What that means to the insurance industry is more premium dollars and a growing line of insurance. Allianz predicts they’ll jump to more than $20 billion in the next 10-years.
The report said, “Cyber risk is now a major threat to businesses. Companies increasingly face new exposures, including first-and third party damage, business interruption and regulatory consequences.”
Sadly, the report said cyber risk remains an underestimated problem by most businesses.
Allianz spokesman Paul Schiavone said insurers need to adapt to counter the risks. Initially insurers have dealt with data breaches and privacy problems. In the future, look for more claims involving intellectual property theft and extortion via cyber and business interruption. “Within the next five to 10 years, [business interruption] will be seen as a key risk and major element of the cyber insurance landscape,” he said.
Other results of the report and suggestions for business:
• Businesses need to spot key vulnerable assets and also address areas such as employee vulnerabilities or over-reliance on third parties.
• Businesses should create a cyber security culture and tackle cyber risk using a “think tank” approach—knowledge sharing from different stakeholders.
• Hidden risks can emerge. M&A activity and changes in corporate structures can impact cyber security and the holding of third party data.
• Companies should decide which risks to avoid, accept, control or transfer.
• Cyber coverage must evolve to become both broader and deeper. Such policies should address business interruption and close gaps between traditional coverage and cyber policies.
• Cyber exclusions in property/casualty policies should become more common. But standalone cyber insurance will keep evolving as the main source of comprehensive cover, addressing demand from industries including telecommunications, retail, energy and transport sectors.
In another report Pricewaterhouse Coopers (PwC) said the insurance industry needs to focus on cyber insurance and learn how to reach out to younger people and younger business owners to get them cyber insurance or lose out.
PwC believes because of the increase and intensity of attacks the cyber insurance market is going to jump to $7.5 billion in annual premium. That’s triple what it is today. But to get that business insurers and insurance agents will need to get creative.
Paul Delbridge of PwC said not getting creative and developing and marketing the right products means companies like Google and Apple — who Millennials trust — will end up with the business.
“I can see Google being very creative,” said.
The report agrees with Delbridge’s conclusion and said, “If the industry takes too long, there is a risk that a disruptor could move in and corner the market by aggressively cutting prices or offering much more favorable terms.”
And — again — the likely disruptor would be Google or Apple or both.
Source links: Insurance Business America and Carrier Management