August 1, 2016 | Written by: Christian Bieck
Categorized: Data security
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When everyone–and everything–becomes interconnected, how will that change risk? Will new risks emerge and old ones disappear? And what do both insurers and insurance customers need to do about it? These were the questions we set out to examine in our latest IBV Insurance study, “Cyber and beyond – Insurance and risk in a digitally interconnected world.” We surveyed 800 insurers and 1,000 companies from other industries about their actions and expectations on the risks of digital interconnectedness, also known as cyber risks. This is what we found.
One of my main personal takeaways is that cyber risks and cyber incidents are on the rise, but companies struggle to prepare. Almost half of our respondents have already had a cyber incident, and a third have suffered economic damage–yet as the chart below shows, even outperforming companies do not have structured programs in place to help them cope with future problems.
Many companies are woefully unprepared for the digital future. Not only do they struggle with risk management, their foundation (that is, the digital skillss of their employees) is inadequate. Even in 10 years, only 44 percent of our respondents believe their workforce will have the adequate skills to cope with digital interconnectedness and associated risks, up from just 27 percent today.
That means insurers have a lot of work to do to prepare themselves and their customers for the digitally interconnected future. Here are some recommendations.
Prepare your organization for a future of digital interconnectedness
This should be started by familarizing yourself with what’s out there technologically, and with the capabilities within your organization–both to understand the opportunities and risks of technology and your own limitations. Leading organizations invest appropriately to fit both; and maybe even more importantly, they engage their own organization top-down and bottom-up in innovative technologies and digital skills.
Build insurance solutions with and for digital interconnectedness
This can start small and safe to allow you to learn about the risks. Afterward, build solutions for interconnectness risks using interconnected technologies. Here, telematics and the Internet of Things come to mind. Again, leading insurers create solutions beyond pure risk transfer, providing answers from risk mitigation or consulting services all the way to post-event forensics.
Collaborate to take full advantage
In the future everyone-to-everyone economy, business will be conducted using ecosystems, and outperforming insurers are fully prepared to embrace ecosystems and adapt their business models. That means extensive partnering in all directions, including customers, suppliers, regulators and even other insurers. Ultimately, it will be important for an insurer to become the epicenter of emerging ecosystems; this will allow them to keep in touch with customers and avoid being relegated to pure white labeling. The latter approach can still work for some, but ultimately only showing value add to customers will allow long-term survival.
To read more about the study, click here.