Conning & Co. Study Shows E-Business Coverage Risks Can Outweigh Rewards for Insurers

Businesses’ increased use of the Internet is making for a substantial growth opportunity for the emerging e-business insurance market, but e-business insurance may not be a good market for every insurer, according to Conning & Company.

Only a handful of insurers have plunged into the e-business insurance marketplace. However, as many other insurers develop their e-business strategies, a new study from Conning & Company recommends taking a cautious approach. There are many questions about both the short-term and long-term viability of e-business insurance that are difficult to answer such as how rapidly the market will grow and how the industry can manage the global scale risk for Internet-related catastrophes.

Conning’s study, “E-business Insurance Products- Emerging Market or Specialty Coverage?” reports that insurers need to consider many factors before entering this marketplace with an estimated 100 percent annual premium growth rate.

However, there can exist substantial rewards for successful insurers. If the e-business market expands rapidly, Conning projects that premiums can balloon to $6 billion by 2006.

Hackers and viruses are an issue for any business connected to the Internet, even those just receiving email. Indications are that threats will continue to escalate as virus creators are able to exploit increasingly sophisticated malicious code and as businesses become more dependent on the Internet for their internal operations as well as customer service and sales.

The e-business insurance market has not yet evolved as rapidly as the associated risks. As a prerequisite for market entry, insurers must know, anticipate and quantify individual risk and accumulation loss exposures that are still rapidly evolving. Changes in technology, statutes and case law precedents add extra complexity to the development of coverage, loss control, pricing and distribution strategies. Insurers face a multitude of considerations in order to determine “if,” “when” and “how” to enter the e-business insurance marketplace.

Conning’s new study provides an environmental scan of the current e-business marketplace and introduces three market growth models- Rapid Expansion, Assimilation and Divided Markets. The also study identifies and analyzes market entry and exit considerations that are unique to e-business insurance.

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