A recent study by Deloitte Center for Financial Services, titled “Insurers on the brink: Disrupt or be disrupted,” indicates that while the demand for cyber liability insurance is expected to boom in the next several years, insurers must develop improved methods of analyzing risk in order to avoid being pushed out of the increasingly competitive market. The report notes that through exploring evolving technological developments and increased customer expectations, the reliance on legacy data pools and other long-standing business models may not be enough to give insurers an advantage in the marketplace. Instead, insurers must move towards “data-gathering opportunities” provided by the Internet of Things and other technologies to compile large data sets used to “significantly improve their risk assessment and pricing capabilities,” especially in the cyber insurance market.
According to the report, “Insurers have historically enjoyed fairly exclusive access to risk-related data, but have generally yet to master the advanced analytics to most effectively monetize such information for predictive modeling and underwriting purposes.” While the cyber insurance market is expected to triple by 2020, according to the Insurance Information Institute, insurers must leverage their own experience with cyber risk-management to better underwrite and limit the exposure of other industries. The report notes that the insurance industry no longer has a monopoly on assessing, pricing and limiting risk and as a result, must turn to new sources of real-time data to gauge cyber risk. If insurers do not “reinvent themselves in fundamental ways” by taking advantage of more precise experimental data, the industry will be left behind allowing new disruptors to fill in the gap.