Cyber-security is the backbone of the digital transformation across many industries, including insurance. However, the insurance industry has recently started attaching importance to developing cyber-security, in contrast with the rapid adoption of other digital technologies.
Just like many other industries, the insurance industry has increasingly been relying on digital activity after the pandemic. As a result, the threat posed by data breaches and cyber-attacks to the insurance industry has been growing.
In this article, we aim to inform you about the cyber risk for insurance companies, and the importance of prioritizing cyber security. Insurance companies must be alert and dynamic when it comes to following the latest security technology. Thus, cyber-threats can be easily noticed and quickly eliminated to prevent potential financial and intangible harm.
Why Is Cybersecurity Important In Insurance?
Insurance companies are a prevalent target of cyber-attacks because they hold considerable amounts of confidential data. While some other sectors also collect sensitive financial data, insurance companies, on top of that, generally possess a substantial amount of protected personal information. This situation makes the insurance industry prone to cyber-attacks.
Remember, nearly everyone has some form of insurance, so the scope of the industry is giant, and the data is sensitive. Potential vulnerabilities of your insurance company might burden you with financial liabilities. These unwanted liabilities include ransoms asked by cyber-criminals, lawsuits by clients, and fines from regulatory agencies. All these scary scenarios underscore the central importance of cyber security for insurance companies.
If you are aware of potential cyber security threats, then you are at the right point to take essential preventative measures such as frequent risk assessment and a solid security plan. In the long run, you will save your insurance company time and money, and more importantly, protect your reputation.
What Are The Cyber Risks In Insurance?
Insurance supervisors claim that cyber security risks trigger other types of risks including digitalization risks, cyber underwriting risks, and harming competitiveness. Therefore, understanding the methods of cybercriminals are important to take measures and stay secure for many elements of your business. Below are some common specific risks that you should be aware of.
Ransomware is a sort of malicious software that enables cyber criminals to prevent you from accessing your data until a certain amount is paid. It is not the best thing to directly pay the ransom instead of combatting the cybercriminals, but many insurance companies do it to fix the issue right away. That’s why it is a popular method among cybercriminals.
The risk of cloud exploits is also getting common as more insurance companies adopt cloud usage. Operating on the cloud expands your surface and makes you viable for data breaches and hijacking attacks. Protecting data from cloud exploits necessitates a powerful cybersecurity structure.
Social engineering is the risk that works with deception. It is usually hard to prevent via cybersecurity tools because individuals themselves give hackers access to the system through manipulation. Cybersecurity training is an effective tool to prevent this type of attack.
Sometimes, cybercriminals target your third-party vendors instead of your insurance company. They can penetrate your data through the system of your third-party provider. To prevent such attacks, you should be jointly keeping up with each other’s cybersecurity measures.
First-Party Vs. Third-Party Risks
The responsibility incurred by the insurance companies varies according to two main types of cyber risks: first-party risks and third-party risks. Knowing about them will help you figure out which precautions to take for yourself and your customers.
What is meant by first-party cyber risks is that they directly affect a business and its information system infrastructure. When the operations of a business are halted due to a ransomware attack, it is indeed first-party damage. In this case, your partnering reinsurance company can help you with fixing the situation such as paying the ransom, notifying customers, and compensating for the duration of halted business.
Third-party risks are about the cyber risks of other organizations that you are supposedly responsible for. When a customer claims that they are damaged because you could not secure their data because of a cybersecurity vulnerability, it is considered among third-party risks. You might have to deal with the third parties’ claims, especially if they engage in lawsuits.
Insurance companies should develop policies to address both first- and third-party cyber risks. Often it is tricky to differentiate third-party damages from first-party ones. For example, if you and your client have both been attacked, then it is not easy to identify how the data breach occurred at first.
The insurance industry is unique because insurance companies hold information about most of the world’s population. Therefore, the cyber risks we mentioned above have significant consequences for insurers and policyholders.
If you are a part of the insurance industry, you should keep your eyes open to these detrimental risks. The key to prioritizing cybersecurity is to incorporate it into your infrastructure technology and let a group of highly skilled personnel operate it.