INFUSE Recap: Cyber Underwriting: The Rise, the Present and the Future.

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Published on:17th October 2024
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Generally, new insurance products take time to gain acceptance in the market. But cyber insurance has proved otherwise. This line of business has evolved rapidly and has fared exceedingly well in a short time. Today, this segment commands great interest among investors and attracts a steady inflow of capital into the industry. By 2033, the global Cyber insurance market size is expected to be worth around USD $90.6 Billion. Naturally, a big market is prone to bigger risks, and there are quite a few challenges insurers must look out for in the Cyber market.

At the 8th episode of Send’s INFUSE webinar series titled, ‘Cyber Underwriting: What’s next?’ the panellists examined the current market for cyber insurance, identified emerging threats and forecasted the future of Cyber underwriting. VP-Head of Cyber underwriting at Millennial Speciality Insurance, Tammy Kocher, spoke about the maturing market and indicated that carriers will explore deeper areas to expand and generate revenue in this segment. Founder at Cyber broker, Assured, Ed Ventham, explained why it is better to train bots for specific functions versus rely on LLMs’s while underwriting for Cyber insurance. Underwriting director from Ki Insurance, Helen Rios, revealed her verdict on live feeds from consumers and whether it could be a reality in the future.

The rise of cyber insurance

The global dependence on cloud computing, IOT (Internet of Things), operational IT and digital services has given rise to a significant increase in cybercrimes. According to Statista, organizations lost $12.5 billion in 2023, up $2 billion year-over-year and more than triple the amount recorded in 2019. This has transitioned Cyber insurance from a hard market to a softer market, turning the spotlight on its relevance and immediate necessity.

Today, there is a sense of excitement about Cyber insurance among brokers.

Carriers are investing in tools outside of policy wordings and the granular data is allowing underwriters to assess risk better. Head Underwriter Tammy Kocher, who writes policies for Fortune 500 companies, indicates that carriers are looking to extend their expertise in cyberspace by using AI in their underwriting.

“’I predict we will start to see carriers invest in specialties and go deeper into the Cyber space by including AI to augment their underwriting.”

-Tammy Kocher, VP-Head of Cyber Underwriting at Millennial Speciality Insurance

AI challenges in Cyber Insurance

As AI evolves, there are new challenges for underwriters in the Cyber domain. Bad actors have begun using AI-driven phishing emails and vishing calls to scam victims. Malicious LLMs such as WormGPT are making attacks more realistic and simpler to execute. Panelist Tammy Kocher says for the first time, she has witnessed carriers appointing (CAIO) Chief AI Officers to better understand the intricacies of AI risks. This indicates that there is an urgency in the industry to adopt AI and begin using it more frequently. However, Ed Ventham, co-founder of Assured, cautions that underwriting is still an art, and AI is here only to augment it. He affirms that underwriters must use AI but ultimately make final decisions with the data they have on hand.

“Insurance is still an art. AI can obviously simplify data and streamline the process. A large part of decisions is still coming from human understanding, and that is an integral part to this business.”

-Ed Ventham, Co-Founder, Assured.

On the positive side, underwriters can benefit from AI by training bots to understand specific subsets of data that will improve their response to adversaries and risk mapping. Ed says that the industry will see massive benefits if they choose this approach. But this largely depends on structuring data appropriately.

Structure data to write better Cyber policies

The insurance industry in general sits on staggering amounts of data. But without structure, even algorithms may not profile risks comprehensively. This is where an underwriting workbench can streamline data and augment risk for underwriters. Underwriting director at Ki Insurance, Helen Rios says that her team has seen great success with modern tools to structure data.

At Ki Insurance, we’ve actually got a team who focus specifically on use cases for large language models, and we’ve had some real successes.

– Helen Rios, Underwriting Director, KI Insurance

Can insurance receive live feeds from policy holders in the future?

The more data underwriters receive, the more consistent they can be with the policies they write. Panellist Ed Ventham proposed the idea of receiving live data from policy holders in the future, which could make risk assessment more comprehensive and accurate. Although it could change the face of risk assessment, panelist Helen Rios suggested that the idea is far-fetched for now and the industry will continue to rely on traditional data to assess risk. Helen feels that the industry is getting more sophisticated, and she has observed an increase in submissions for parametric deals, a type of insurance that covers the probability instead of compensating the actual loss incurred from the event. These are positive signs for the industry that is constantly evolving with new ideas.

As the webinar closed, the panelists shared their final thoughts on the future of Cyber Underwriting:

-Tammy urged underwriters to verify AI before trusting it completely. She said we need AI, but we also need to verify and validate data before underwriting policies.

-Helen recommended underwriters to expand their data to public and private sources to write better policies in the Cyber space.

-Ed suggested collecting stronger in-house data and utilising that to add more value to the clients.

The digital world is rapidly growing and Cyber risks will continue to evolve. Cyber insurance will be paramount in helping organizations build resilience against ransom, supply chain and data attacks. With the help of automation and modern tools, Cyber underwriters can ensure that consumers are covered sufficiently and continue to make this domain sustainable and profitable for the industry.

Keen to learn more? You can watch a recording of the webinar here.

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