Other parts of this series:
- Digital transformation exposes insurers to greater cyber-security risks
- Insurers need to build business resilience to counter the rising threat of cyber-attacks
- Insurers need to instill business resilience throughout their organizations to counter cyber-security risks
- Three key steps that will help insurers beef up business resilience to combat rising cyber-security threats
The proliferation of digital technology is providing insurers with plenty of opportunities. But it’s also exposing them to greater cyber-security risks. Trying to balance spending on digital innovation with expenditure on cyber-security is not a good strategy. We think there’s a better approach
The rapid spread of digital technology is enabling insurers to quickly transform their businesses. They can swiftly roll-out new products and services to meet the changing demands of their customers. And also seize opportunities to move into new lucrative markets.
However, the proliferation of digital technology has a sting in the tail. It exposes insurers to big risks. Digital downtime, caused by human or technical failure or cyber-attacks, can be catastrophic. It can devastate a business. Sometimes even destroy it. It’s not just the loss of revenue that can be so damaging. The harm to an organization’s reputation and brand can be enormous. If a company loses the trust of its customers, partners or investors, the consequences can be dire. Furthermore, regulators around the world are stepping up governance standards. Organizations deemed to be negligent in their cyber-security face being hit with severe penalties.
Insurers are particularly vulnerable:
- They handle big volumes of sensitive customer data and are therefore attractive targets for cyber-criminals. As many as 59 percent of insurance executives say their IT systems experience significant attacks at least every week.
- Carriers operate in highly regulated markets. Breaches of security, which expose customers’ personal data, are likely to be heavily penalized.
- Insurers are in the risk business. Their exposure to reputational damage is substantial. If they succumb to a cyber-security breach or major technical failure their professional competence can be seriously undermined.
- Many insurers are beginning to adopt new business models to capitalize on the potential of digital ecosystems. They will become increasingly reliant on processes, technology and people that they have limited or no control over.
The challenges facing insurers are clearly substantial. How do they take advantage of the huge benefits of digital technology, vital for their success and perhaps survival, and also shore up their protection against a potential cyber-disaster? Up till now, insurers, like many organizations, have tended to trade-off spending on digital growth and innovation with expenditure on protection. But our research shows that this is not a satisfactory solution.
Insurers need a better approach. In my next blog post, I’ll discuss the importance of shifting focus from just cyber-protection to building business resilience. Until then, take a look at these links. I think you’ll find them useful.