With traditional insurance firms still struggling to provide coverage for cyber risk, specialty start-up companies have the potential to take a slice of this multi-billion dollar insurance market segment.
AIG data revealed that insurance underwriters collected $1.6 billion in premium income in 2015 while
Allianz projected income to grow to $20 billion by 2025. Take up rate for cyber insurance averaged 24% across US businesses. Meanwhile, only 40% of Fortune 500 companies have procured insurance against cyber incidents, and those that have policies are not fully covered as compared to their exposure.
But this ripe market has yet to be optimised, with traditional insurance providers still grappling with the relatively uncharted territory of cyber coverage. Gaps in service provision clearly point to room for new entrants who could provide technical knowhow.
Enterprise customers are willing and eager to buy coverage, but struggle with understanding the risk factors. A NetDiligence 2015 Cyber Claims Study noted that 48% of businesses surveyed do not completely understand the complexity of risks involved in protecting their cyber assets.
Among others, the simple matter of identifying the basic risks involved is a cumbersome task for this market. Considerations include business continuity, intellectual property theft, data protection, and estimated damages.
There is also an absence of an adequate risk assessment framework and conventional taxonomy, which are needed to define the parameters of coverage.
With the presence of such issues, insurers face the challenge of developing products that adequately meet market needs. Loss ratio forecasting and computing for product profitability in a new market are obstacles, primarily because of the lack of historical data upon which to base market offerings.
Cyber security firm Symantec aims to have a finger in the insurance pie by using data mining technology and hiring statisticians to use historical and real time data in crafting its cyber insurance offerings. The company is in a prime position to use its leverage as a security firm—it is able to track 800,000 security events per second.
