Overcoming the lack of data

Partly driven by the global COVID-19 pandemic, an increase in cyber threat levels and demand for protection could represent a prime opportunity for a rethink of cyber underwriting, as Intelligent Insurer discovered.

With digital operations increasing all the time, accelerated by the COVID-19 pandemic, cyber insurance has moved up the agenda for many businesses.

Intelligent Insurer caught up with Cowbell Cyber founder and chief executive officer Jack Kudale ahead of the webinar “Meet the Ever-Growing Demand for Resilient Cyber Protection: Overcome a Lack of Data and Enhance Data with Additional Information”, held on May 26 and now available online HERE.

The cyber insurance market is growing rapidly, said Kudale, yet there is a lack of historical data in terms of cyber underwriting and it’s an issue he is keen to highlight. He has questioned how underwriters are managing the process of understanding cyber and how they are able to understand the risk and price the policies without much historical data.

“The industry has been writing billions of dollars for cyber insurance over the last three years, so it clearly is underwriting minimal historical data. But how has the industry been able to work without standardisation in data and coverages?

“Everyone has a unique model for how cyber is underwritten and how underwriters practise that,” he said. This means it is important to discuss different variations in the process, best practices and new ideas, he added.

Another element that is crucial to this cyber underwriting discussion is how data plays a role in packaged versus standalone coverage, and how data plays a role for underwriting small businesses versus large enterprises.

“We’ve seen more investment in cyber from the agencies as well as insurers.”

How could the pandemic change cyber underwriting?

“This is especially important in a post-COVID-19 era where the threat level from cyber attacks has gone up significantly. Phishing has gone up 600 percent and the use of ransomware has increased. People are responding to those events and rates have gone up 15 to 20 percent for cyber premiums.

“At the same time there is a view that 85 percent of cyber can be underwritten using just industry class and revenue. There’s an interesting discussion to be had around whether we can continue to underwrite cyber in the same way, particularly post-COVID-19.

“In the context of the accelerating pace of growth and how data plays a key role in good underwriting, it’s also interesting to consider how big a role artificial intelligence (AI) can play,” Kudale said.

“We’ve seen more investment in cyber from the agencies as well as insurers. Agencies are looking at cyber as their new line of business for growth. Behind every crisis is an opportunity, and this is one of them.”

Key messages

“A key thing to think about is where heavy investment in cyber is going in terms of capacity and new business models. Other product lines have enough data to rely on for such investment but cyber doesn’t,” Kudale explained.

With this in mind, Kudale said, insurers need to consider how data can play a role in cyber underwriting, loss control and how AI can aid risk modelling. He also raised questions around how far away the industry is from standardisation in overall cyber underwriting.

“Everybody cares about good underwriting because it means fewer claims, a better product and a faster process to obtain cyber insurance,” he said.

Image: / Elnur

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