As the global economy becomes increasingly reliant upon technology, the risks of a cyber-incident occurring have grown considerably, fuelling demand for a cyber-insurance product capable of reducing the potential impact on businesses. With demand for cyber insurance only recently branching into other industries outside of the technology, media, and telecoms and professional services sectors, those across the insurance space must be poised to react in order to become market leaders.
Listed below are the top technology trends in cyber insurance, as identified by GlobalData.
Internet of Things (IoT)
The growth of IoT devices will greatly increase the cyber risks faced by businesses, in turn increasing the exposure faced by insurers. Yet despite the increased risk such devices pose, they will also assist in growing the cyber insurance market further. Some examples of IoT devices include wearable technology, connected vehicles, and automated home devices.
Wearables will develop into more complex products that can track human vital signals. The data these devices collect is very sensitive to consumers. Companies operating in this space will need rigorous third-party liability cyber insurance to protect against both monetary and reputational damages.
Autonomous and connected vehicles
Autonomous and connected vehicles are the future of the automobile market. These vehicles have the potential to drastically reduce road traffic accidents and fatalities, as well as reduce congestion on the road.
As with any other connected device, this leads to cyber risk. Ransomware can cause cars to remain locked until the owner sends a payment. If cyber criminals are able to trick a vehicle into thinking an object is not there this could lead to tragic consequences. On a larger scale, such attacks could be used by terrorist organisations.
Such scenarios make the cybersecurity of autonomous and connected vehicles paramount. On the one hand, cyber insurance clauses will begin to appear in personal motor insurance contracts, protecting against ransomware attacks, for instance. On the other hand, companies involved in the manufacture of autonomous and connected vehicles could face large third-party claims should their software be compromised, which will generate demand for cyber insurance in this sector.
Automated home devices
Automated home devices range from smart appliances like fridges that are designed to make life easier, to devices tailored to protect the home, like wireless security cameras and leak detectors. These devices need to be connected to the internet to function properly.
Insurers may find themselves facing increased claims should these devices fail. For example, if criminals find a way to hack smart locks, they have access to every home that uses that model. Again, producers of automated home tech will need robust cyber insurance policies to protect themselves against failures in their software.
Blockchain has been touted as a tool that has the potential to change the face of the insurance industry. Blockchain can reduce a company’s cyber risk by providing a decentralised, shared, immutable ledger. This reduces the likelihood that a network can be compromised from a single source, or that a hacker can manipulate a particular ledger without first compromising the entire system.
Companies that employ blockchain could be viewed favourably by insurers and therefore be subject to lower premiums due to their higher cybersecurity levels.
Large corporations are building private and hybrid clouds, while SMEs are spending significantly on public cloud services. Both of these activities could open businesses up to a higher risk of cyberattack. The shift by businesses towards the cloud will be unlikely to stop due to the cost savings and increased efficiency businesses gain from its integration. The cloud computing market is forecast to experience considerable year-on-year growth across all regions, highlighting the need for insurers to be aware of the new risks.
The preventative side to cyber insurance policies will become increasingly important both to businesses and insurers. In order to keep pace with the ever-evolving cyber risks faced by businesses, cybersecurity providers continue to innovate and refine technologies. The development of behavioural analytics software is a prime example of this.
Cybersecurity is an area in which partnerships between insurers and cyber specialists will become increasingly important. Insurers that fail to partner with cyber specialists will struggle to establish themselves as leaders in the cyber insurance market.
Big data is data that is so voluminous and complex that traditional data processing application software is inadequate to deal with it in its entirety. Due to the volume of data involved, companies handling big data can face considerably more cyber risks as they become more valuable targets for cyber criminals. The cyber insurance market will see an increase in demand as companies across industries look to leverage the benefits of big data throughout their business.
Artificial intelligence (AI)
The insurance industry stands to benefit from AI in a number of ways. AI is set to revolutionise numerous industries and will eventually become fundamental to their day-to-day operations. The growth of AI in the coming years will make it a major area of risk for the cyber insurance market, but it could also be a key driver of growth. As reliance on AI grows the potential for a cyberattack also increases. Businesses will therefore demand cyber insurance policies to cover the losses.
This is an edited extract from the Cyber Insurance – Thematic Research report produced by GlobalData Thematic Research.