With escalating threats to cybersecurity, businesses are searching for ways to supplement traditional security and to protect their business if anything happens to them, while cyber insurance companies are struggling to keep up with demand and searching for ways to innovate and create a sustainable future in the market.
With the rise of third-party vendors and service providers, threat exposure has expanded and increased the chances of a security incident. Even a global pandemic couldn’t stop cyber criminals from exerting great efforts in all kinds of traditional and innovative cyber attacks.
The statistics for 2021 are grim. According to the Identity Theft Resource Center’s 2021 Annual Data Breach Report, the overall number of data compromises (1,862) is up more than 68 percent compared to 2020. SonicWall called 2021 “The Year of Ransomware” and reported nearly 500 million attacks through September 2021, with a staggering 1,748 attempted attacks per organization. The firm’s 2021 Cyber Threat Report also found a staggering 48% increase in global ransomware attacks, with the U.K. witnessing a 233% surge and the U.S. a 127% increase in the number of ransomware attacks. Research conducted by PwC found that more than 60% of technology executives expect this to increase over the next 12 months. According to IBM’s 2021 Cost of a Data Breach Report, the total average cost of a ransomware attack was $4.62 million — more expensive than the average cost of a data breach, which was $4.24 million.
The only thing we can guarantee for the future is that the numbers will rise. According to these statistics, cyber insurance is critical. Organizations must preempt attacks and are seeking out ways not only to fortify security but to guarantee compensation in the event of a breach or attack. That is what insurance is for- but it isn’t so simple.
The goal of any insurance underwriter is to properly assess risk by applying actuarial science to assign a monetary value required to properly insure against that risk. Cyber insurance providers face significant challenges in terms of:
- A lack of historical data
- An unknown future
- Possibility of catastrophic events
- Uncertainty defining the terms, a lack of standardization
- Huge loss ratios
Cyber Insurance covers loss of and damage to information, IT systems and networks, yet it’s hard to be eligible. Insurance companies cannot afford to provide insurance to organizations who have a weak cybersecurity posture. How do cyber insurance companies manage risk and simultaneously drive growth in the industry? How do insurance companies mitigate cyber risks for the clients whilst mitigating the risks their clients bring with them?
Risk Management in Insurance Business
Cyber insurance is a relatively young market and the opportunity to differentiate yourself from the competition lies in your ability to assess risk properly and empower your clients to boost cybersecurity and reduce their risk. The concept of insurance and risk management go hand-in-hand: Insurance is complementary to risk management, but risk management is crucial to insurance.
Here are 5 steps to risk management for insurance companies from the experts:
Step 1 – Identify Your Own Risks
Start with a comprehensive risk assessment for your own company to identify your own company’s risks. Your clients will be depending upon you for your services so the first thing to have in place is your own security. Use an automated risk and compliance platform that you can deploy risk assessments easily to all of your potential clients to have them take their risk assessments and clearly identify the risks with each.
This is also known as Insurance Loss Control which is defined by Investopedia as:
- Insurance loss control is a set of risk management practices designed to reduce the likelihood of claims being made against an insurance policy.
- Loss control involves identifying risks and is accompanied by voluntary or required actions a policyholder should undertake to reduce risk.
- Policyholders may benefit from loss control programs through reduced premiums, while insurers can cut down their costs in the form of claim payouts.
Step 2- Analyze the Risk & Decide How Much Risk is Acceptable
Analyze the risks you identified and measure the likelihoods and consequences that these risks may have on your company. Risks can prevent your company from achieving your business objectives. Decide on your risk appetite, on how much risk you can absorb, how much you want to transfer and how much you can mitigate (more in the next step about this).
In the case of an insurance provider, deciding how much and what type of risks you can handle will define who your clients are, what you are willing to cover with insurance, and what you will charge for premiums.
Step 3 – Evaluate the Risk or Risk Assessment
Evaluate the results of your own risk assessment to establish your own risk posture. Ensure it is within reasonable limits and take appropriate actions to correct flaws and close gaps.
Do the same for your clients. Look clearly at the risks your client brings, and decide which risks are acceptable according to your risk appetite. Acceptable risks must then be constantly reviewed and monitored to ensure they are continuously acceptable. What happens if you find risks that are unacceptable? Your three options to mitigate these “unacceptable risks” are to avoid the risk (which may mean not accepting the client for business), to reduce the risk or to transfer the risk. Transferring the risk will be within the category of risk that your insurance company accepts and allows under your coverage. Reducing the risk can be done with an efficient automated risk management platform with remediation capabilities, detailed below.
Step 3 – Remediate or Mitigate the Risk
Now that you’ve identified your risks, analyzed and prioritized, it is time to remediate. Remediation is the process of fixing the flaws you’ve found, closing the gaps, and addressing the threats. This will involve making certain changes within the company, inviting new policies or behaviors, adding security controls or installing protections- depending on the risk you are remediating. Remediation is really the goal of the whole process and is the action that will reduce the risks.
Remediation is when the risk can be eradicated in full. Mitigation comes into play where the risk cannot be eliminated altogether, so it must be reduced as much as possible, a form of damage control.
Ensure your client portfolio is provided with clear steps to remediate and mitigate their risks. This will empower your customers to actively reduce risk, lowering the likelihood of a claim and benefiting both the customer and yourselves.
The key to efficient remediation is having full visibility: into the results of your risk assessment and that of your clients as well as into the steps needed for remediation. Look for a platform that will clearly display remediation steps, measure progress and calculate your score based on real-time so you can easily comprehend your security posture at all times.
Step 4 – Monitor and Review the Risk
Continuously monitoring your risk posture will ensure that you remain safe from the risks you have identified and remediated. This stands for your own company and even more so for your clients, where you cannot control the operations or environment, yet are responsible to insure it.
Monitoring your clients risk posture on a continuous basis will enable you and your clients to ensure the required standard of security is in place and relevant to operations, and ensuring you are still willing to offer your client coverage on your terms. Monitoring your portfolio’s risk will reduce the cost of and preempt any difficulty in investigation into the state of their security in the event of a claim.
Reviewing your risk assessments will allow you to evaluate if the level of risk you are covering is producing the result you want. Are you covering too much? Could you provide increased coverage safely? Are the security controls you require from clients providing a sufficient level of protection in practise?
Step 5 – Reporting
Providing cyber insurance coverage involves an understanding of the field, the technical controls and risks involved, the industry-specific dangers and much more specialist information. Using a risk and compliance management platform with pre-programmed industry-specific and general questionnaires eliminates the need for specialized knowledge of the field as everything is covered via these industry standards.
A modern risk management platform for insurance companies can also provide an automated reporting function that takes the technical risk assessment outcomes and translates them into financial and business terms so they can be evaluated and understood easily and used for business decision making or by board level or executive management. These reports will make it simple to evaluate each customer and decide on premiums, coverage and risk tolerance levels for each or across the board.
Reports are incredibly useful and save hundreds of hours of compiling evidence into comprehensive and comprehensible reports.
Insurance Company Risk Management Solution
The Centraleyes risk and compliance management platform enables insurance companies to not just take care of their own risk and compliance needs but to easily onboard hundreds of clients and assess, analyze and empower clients to remediate their risk, actively reducing claims and costs. We streamline the entire risk management process for insurance companies.
Centraleyes provides all of the tools mentioned in the article- automated remediation steps, automated reporting capabilities, pre-built questionnaires for industry standards and frameworks- and much more. The platform also displays a clear visual dashboard that shows full visibility into each customer and total control over the entire procedure. Track progress, incorporate external threat intelligence, and
We recognize that each company operates on their own terms and one size may not always fit all for insurance risks management. Leverage our exclusive enterprise risk register to manually add, customize, and filter risks based on their unique use cases, without sacrificing the powerful intelligent automation that defines the platform.
Insurance companies can take a free trial with our platform and see immediately how we can help you manage your clients, actively reduce your clients cyber risk, lower costs and streamline the process.