Advancements in artificial intelligence are in many ways a double-edged sword for the cyber insurance industry. Increasingly diverse and sophisticated cyber attacks have dramatically increased the demand for cyber coverage, offering a lucrative opportunity for insurers to capitalize upon.
However, the complexity of cyber underwriting makes it difficult for insurers to scale their cyber operations quickly. In order to meet current booming demand, as well as the increasing intricacies of managing risk while supporting remote work, insurers may benefit from adopting artificial intelligence (AI) technologies of their own in order to increase efficiencies and enable more effective detection of cyber threats.
The market for cyber insurance is projected to grow at an annual rate of more than 25% between 2020 and 2030. However, these projections do not adequately account for the operational complexity of scaling cyber insurance offerings quickly. This difficulty is caused in part by the need to process and analyze ever-expanding amounts of data to accurately predict the risk of attacks. Underwriting cyber risk is also particularly challenging and time-intensive due to the volatile state of the market, which is constantly fluctuating with regulatory shifts, technological advancements and the rapidly-evolving threat landscape.
In order to meet the rising need for cyber coverage without giving up ground on reliability and customer service, insurers must rethink their cyber insurance operations. Continuously hiring new underwriters to try and keep up will inevitably result in inefficiencies due to compensation costs, training requirements and human error. With AI, insurers can increase the efficiency of their underwriters and other staff to a substantial degree while incurring minimal costs and ensuring the efficacy of their coverage.
For instance, AI can be used by insurers to process vast repositories of data and create visualizations to help human underwriters understand potential threats that may be difficult to detect via manual data analysis. In addition, AI automates time intensive underwriting processes like document vetting, risk score calculation and intelligent routing to increase efficiency and reduce human error.
AI can also recommend cyber threat prevention services and policy features tailored to specific companies and industries, improving the value of customer policies and increasing customer loyalty. Insurers that utilize AI are able to deliver more accurate threat analysis, more tailored coverage and a superior customer experience. Their customers will benefit from an easier policy purchasing process and chatbots that allow them to interact with the insurer at any time to clarify the often complex nuances of cyber policies.
Amid the COVID-19 pandemic, 91% of enterprises reported an increase in cyber attacks, as cyber criminals seized upon the vulnerabilities of a newly decentralized workforce. This is not likely to be a short-term phenomenon. Although the pandemic accelerated the trend toward digital transformation, the demand for cyber insurance will continue to rise as companies adopt new technologies and cyber threats evolve.
If the insurance industry is going to meet this growing demand, it needs to innovate its customer experience, underwriting procedures and incident response strategy. Given the massive amount of data related to cyber threats, AI is undoubtedly the future in addressing the risks associated with these threats.
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