Digital disruption is causing some serious soulsearching in the insurance industry – to the point where Lloyd’s of London is questioning the industry’s relevance.
Delta Insurance managing director Ian Pollard doesn’t quite agree cyber threats will be an “uninsurable risk,” but he certainly notices the lines blurring between brokers and insurers because of digital disruption.
“Insurers are starting to think about going more direct and brokers starting to set up agencies, even in New Zealand,” he says. “Another dynamic is the non-traditional, peer-to-peer insurers using mobile technology entering the market. I would be surprised if there isn’t a technology company in the insurance space in the near future.”
Mr Pollard says cyber insurance has been a reality since the turn of the century and has come a long way since then. And even with all the catchup the industry is working through, “there’s still space for advice, quality products and innovation” for cyber products. “But it ‘s difficult because there is disruption and a lot going on. The status quo is being challenged so now is a good time for people to buy cyber insurance.”
“Cyber is not something you can predict. Where the insurance market has more of a role to play is around predictive analytics, though. Because at some point in the near future, we’re going to experience a lot more claims activity. Cyber is one of those things we’re going to have to keep talking about,” he says.
The GCSB revealed earlier this year that, on average, seven serious cyber-attacks in which foreign actors attack nationally significant organisations in New Zealand are detected each month. The cyber insurance market globally is estimated to be about $US2.5 billion, and in the next four years should rise to $US7 billion.
“There are schools of thought about making cyber insurance being a bit like earthquake insurance and perhaps creating a centralised fund,” Mr Pollard says. “But the latest estimates place the cybercrime industry itself at about $US3 trillion. So the two sides are highly unbalanced.”
A recent survey of risk managers also found that 49% believe insurers are hardly innovative or not innovative at all. And only 1 % viewed insurers as being highly innovative. “Those are sad and stark facts,” Ms Beale says.