Are you aware that cybercrime increased 600 percent due to the COVID-19 pandemic? With so many people forced to work from computers at home, cybercriminals hit the jackpot when it came to workplaces they could sabotage and profit off of.
With so many of the world's businesses heading online, no business is safe from the threat of cybercrime. The insurance industry is no exception.
Have you found yourself wondering about the cyber security impact on the insurance industry? Then you've come to the right place.
What Risks Do Insurance Companies Face?
When it comes to cybersecurity, there are things that make insurance companies uniquely vulnerable. There are also risks that every business faces that insurance companies should be aware of.
Let's take a look at a few examples.
Liquidity is the ease with which business assets can be converted into cash. Previously, insurers regarded liquidity as not that much of a problem. Due to the nature of the industry, where premiums are received before claims are paid, liquidity is seen as par for the course.
However, cybercrime poses unique risks to liquidity.
If an insurance industry stores some of its money online or interacts with customers through a portal, a cybersecurity attack could easily freeze its liquidity. Companies that keep important information and customers online are dealing with a case of digital liquidity. If cybercriminals get into your system and encrypt your digital assets, those assets are no longer liquid — they might as well not be there.
We're not suggesting that you go and hide all of your money in your mattress. However, in a world where paper money is starting to mean less and less, you have to take extra care to make sure that you can gain access to your funds.
Insurance companies have to stay hypervigilant about problems like this since they're dealing with other people's money as well.
Just like banks, insurance companies don't always have the money that they're lending out. This can spell disaster in times of hardship. Just look at Hurricane Andrew, when 11 insurance companies fell into insolvency because of how many claims came in.
Insurance actuaries are people who analyze statistics to determine insurance risks and premiums. They're a key part of any insurance company. Actuaries are at special risk during cybersecurity attacks.
While everyone would suffer if they had personal information or data stolen, actuaries would suffer extra hard. They have access to many people's personal information, so they're a high-priority target. An actuary facing a cybersecurity breach could easily get extorted, or have any number of their clients extorted.
Since insurance companies are relying more and more upon computers, these risks are becoming more prominent.
It's also becoming much easier for hackers to get involved with complex cybercrime tools they can use to take down businesses. Cybercriminals themselves might not even have any skin in the game. With dark web black-market sites, disgruntled employees, activists, or even competitors can hire hackers to attack certain insurance companies.
This goes hand and hand with the risks actuaries face. Insurance companies rely on the trust of their customers. If people don't trust them, they're never going to gain access to the personal information that's important to insurance.
If an insurance company suffers from a data breach and a customer finds out that their information has been leaked, that customer is likely not going to trust the insurance company anymore. It matters little if the insurance company did anything wrong. If that customer hadn't gone with that insurance company, their private information would not have gone out into the world.
It's very easy, in our digital world, for these dissatisfied customers to go online and leave reviews about their experience. Seventy-nine percent of shoppers say that they trust online reviews as much as in-person recommendations. This spells disaster for that insurance company.
If the compromise is big enough, the cybersecurity breach could even become a news story. No one wants their insurance company to become known as the one that loses people's information. It doesn't matter if it's your fault or not — that sort of reputation does damage.
But businesses aren't just businesses. Businesses are made of people. The people who run businesses are just as subject to personal cybercrime as everyone else.
While it might not be quite as obvious, more subtle forms of cybercrime can easily impact your business a great deal. Simply getting locked out of your personal computer might not seem as dramatic as having your client's information leaked, but it can impact your business. If enough of your top members can't access their personal devices for days and weeks, you might suffer a hit in your business.
Strategic risks are risks to areas of strategic importance in business. Some famous examples of these are a competitive advantage, a high-quality customer service team, and trade secrets.
Cybercrime — since it deals with information — is a large threat to strategic risks. Without protection, a cybercriminal could easily pop in, expose some of your trade secrets, and disappear. This won't cripple your business, but it might just cause you to lose your competitive advantage.
A cybercriminal could similarly mess with your customer service system. This could leave your customers unsatisfied with your business, and choose your competitors over you.
Underwriting Insurance Risks
An underwriter is someone who takes on the financial responsibilities of another who's undergoing a certain amount of risk. Underwriting risk is the risk that an inaccurate assessment might be made. This becomes very easy when one is a victim of a cybersecurity attack.
When insurers underwrite poorly, they risk paying out more than they received in premiums. This might benefit the person receiving the payout, but ultimately damages the company and the insurance industry.
Data Breaches in the Insurance Sector
Recently, there's been a spike in insurance breaches in various insurance companies.
An insurance breach recently put 500,000 people's information out into the public. In the modern world, it's easy to get an instant quote. It's also incredibly easy to lose your privacy.
Cybercriminals are constantly devising new ways to take down various industries. They often communicate with each other and target specific businesses with perceived weaknesses. The prominence of attacks recently suggests that there are more to come, especially since the culprits have not been caught.
Cyberthreats represent a specifically unique threat to the world of insurance. It's forcing companies to get used to the contemporary world or suffer.
Many people in the course of the COVID-19 pandemic lost their livelihoods and have been left wondering what the point of getting insurance is after all. With platforms like GoFundMe and Kickstarter, people have crowdfunded their bills after a financial downfall.
All of this represents that the tech world seems to be conspiring against the insurance industry, especially given that there are 8 different ways a breach can occur.
How Do Insurance Companies Avoid Cyber Attacks?
The insurance industry would do well to incorporate a combination of technology and policy in order to help them through this growing threat. Let's take a look at a few ways that insurance companies can avoid cyber-threats.
While hackers have gotten smarter over the years, at the end of the day, they make use of many of the same tactics. One of the most common tactics is a simple social-engineering strategy called phishing.
Phishing is simple. The hacker will pose as a reputable business and send a link to a person. When the person opens the link, malware will spread on their computer.
Or, the person posing as the reputable business owner could ask for personal information to "verify" something.
Phishing can be solved by simply educating all of your employees. Let them know that they should never click a link from someone that they don't know. Teach them as well that reputable businesses never need to know personal information.
Hiring An IT Company
Any insurance company would do well to hire experts to deal with their cybersecurity problems. The technology possessed by the best of these companies can combat the technology of hackers.
Cybersecurity companies have automated certain parts of their business to the point where they can locate risks and immediately swoop in to stomp them out. The best way to deal with hackers is to allow them as few holes as possible to get in.
Prevent Threats to Yourself, and Your Business
Now that you understand the cyber security impact on the insurance industry, you might have a few concerns about your insurance company. We can't blame you, with half a million personal information exposed, we would worry too.
Thankfully, there's a solution. We at Insurdinary are here to put you in touch with the most secure insurance companies out there. For more information, get a quote with us today.