It’s a question that all underwriters in all lines of business ask themselves, but for cyber it feels a little more difficult to answer.
Unlike hurricane risk, which has changed little in centuries, cyber risk changes daily. It can evolve in previously unimaginable ways, varies vastly from insured to insured, and has the potential to be enormously systemic.
There’s a huge onus on cyber underwriters to remain on top of the risk, recognise their insureds’ vulnerabilities and, of course, price risks accurately.
The Insurance Insider’s third annual cyber rankings survey found that brokers value knowledge and experience the most in underwriters.
So should the cyber market be using as much data and technology as is possibly available in order to build that knowledge and understanding?
At this cyber insurance roundtable, participants discussed that very topic.
Around the table were underwriters and brokers, as well as experts from FICO, a firm which made its name in providing credit rating scores but has now extended that methodology to cyber security.
At the crux of the debate was whether scanning and scoring technologies were more successful in assessing how vulnerable a client is to a cyber attack, versus a more macro view of the threat landscape – often known as “hackernomics”.
This led to more existential questions around the extent to which underwriters should rely on this information to price risk.
Can the data available ever really keep up with the ever-changing nature of cyber risk? Do scanning technologies really work when many cyber losses stem from human error? Does human gut instinct still have a part to play here?
Brokers around the table argued that while underwriters certainly benefit from having more data available to them, giving a client a score on their cyber security could actually make cyber insurance a harder sell, particularly if a bad score triggers a negative reaction.
Equally, how do clients really feel about their insurer taking a “Big Brother”-type approach in assessing their risk?
The questions being tackled by the cyber market today will undoubtedly become more pertinent to the rest of the market in the years to come.
Underwriters in the property cat or marine markets may argue they have a good grasp on the risks they need to price. But in a market where margins are fine and capacity is plentiful, the effective and smart use of technology will offer a real competitive edge.
Soon there will be an arms race in building these capabilities, if it hasn’t started already.
A rousing – and sometimes heated – debate was had at our roundtable as participants tackled head on the big questions around the use of big data and technology in underwriting.
It certainly made for an interesting session and I hope the debate continues in the years to come.
To view the Cyber Roundtable supplement, please click here.
Catrin Shi, News Editor, The Insurance Insider