Cyber security in the insurance sector: the scenario, risks and future challenges
SAFE CORE
Reference context
The digital sector has transformed into a high-risk environment for insurance companies, which are faced with ever-increasing cybersecurity challenges. In 2021, major companies in the insurance industry have suffered cyber incursions.
These incidents have highlighted the growing threat from cybercriminals intent on exploiting gaps in insurance networks and systems.
Cyber attacks on insurance companies have multiple repercussions. These companies collect, process and store a wide range of sensitive and personal customer data, including financial, medical and legal details. This makes them attractive targets for hackers.
The current situation of increasing cyber threats and the need to protect sensitive customer data is driving a significant increase in the cybersecurity market in the insurance sector.
Cybersecurity-related revenue in the insurance industry is estimated to grow at a compound annual rate of more than 10%, reaching approximately $10,6 billion by 2025.
In this context, insurance companies are called upon to prudently manage the issue of cybersecurity, to prevent damage to their reputation and relationships with customers.
Technological evolution in the insurance sector
Technological evolution in the insurance sector it is leading to significant transformations and opportunities for insurance companies. These changes are impacting many aspects of the industry, from risk assessment to claims management and customer interaction. Some of the major technology trends in the insurance industry include:
Insurtech: Insurtech startups are revolutionizing the insurance industry through the use of innovative technologies to offer customized products and services, improve operational efficiency and reduce costs.
- Big data and advanced analytics: The use of big data and advanced data analysis techniques allows insurance companies to improve risk assessment, personalize insurance products and optimize customer segmentation. Thanks to data analysis, insurance companies can offer more targeted policies and competitive rates to their customers.
- Artificial Intelligence (AI) and Machine Learning: The introduction of systems based on artificial intelligence and machine learning has improved the operational efficiency of insurance companies by automating processes such as risk assessment, claims management and customer service.
- Internet of things (IoT) and telematics: The Internet of Things (IoT) has greatly influenced the insurance industry, especially in the field of auto insurance and claims. The growing diffusion of connected devices and sensors has allowed insurance companies to collect a large amount of real-time data on vehicles and driver behavior.
Innovation in insurance services has become increasingly important in the digital age we find ourselves in. Digital technologies, such as artificial intelligence, data analytics and blockchain, can help create customized insurance products and improve the efficiency of business processes.
This new era of insurance 4.0 aims to improve the customer experience, optimize internal processes and develop more personalized and efficient products and services, tailored to the specific needs of individual consumers.
Innovation in insurance services is therefore a key element for the future of the sector, and the companies that adopt digital technologies, sustainable development and contribute to the growth of businesses and households will have a significant competitive advantage.
Vulnerabilities in the sector
The insurance sector is exposed to various vulnerabilities, some of which are related to technological evolution and growing cyber threats. Below are some of the key vulnerabilities in the industry:
- Cyber Security: As discussed earlier, the insurance industry is an attractive target for cybercriminals due to the huge amounts of sensitive data it handles. Insurance companies are constantly faced with the risk of data breaches, phishing attacks and ransomware.
- Regulatory changes: Insurance companies are subject to strict government regulation and must comply with data protection laws, such as the GDPR (General Data Protection Regulation) in the European Union. Regulatory changes can create challenges for insurers in terms of compliance and business process adjustments.
- Technology addiction: The adoption of advanced technologies can lead to an increased dependence on technology service providers and complex systems. This can lead to risks of operational disruptions and system malfunctions, potentially impacting business continuity and customer experience.
- System Integration and Compatibility: The integration of different technologies and systems can create interoperability and compatibility challenges. Insurance companies need to ensure that the technology solutions adopted can work efficiently together and are able to exchange data smoothly.
- Confidentiality and data privacy: Confidentiality and data privacy are critical issues in the insurance industry, as insurance companies collect, process and store large amounts of sensitive and personal data about their customers. This data may include financial, medical, legal, and other personal information that needs to be protected in accordance with privacy and data protection laws, such as the General Data Protection Regulation (GDPR) in the European Union.
Cyber security in the insurance sector: Guidelines
The cyber guidelines for the insurance sector they are essential to protect companies and their customers from cybersecurity risks. Here are some of the main recommendations:
Cyber risk assessment and management: Insurance companies should implement a structured approach to identify, assess and manage cyber risks. This process should include risk mapping, threat analysis and taking appropriate mitigation measures.
- Training and awareness: Insurance companies should promote cyber risk awareness and training among their employees, customers and partners. This can be done through regular training programmes, awareness campaigns and the dissemination of good cybersecurity practices.
- Data protection and privacy: Insurance companies should have strict policies and procedures in place to ensure the protection of sensitive customer data and compliance with data protection and privacy laws, such as the GDPR (General Data Protection Regulation) in the European Union.
- IT infrastructure security: The corporate network must be constantly monitored to identify any cyber attacks or anomalies in data management. Access logs to IoT devices and computer systems must be kept regularly for traceability.
- Patch management and software updates: It is essential to keep operating systems, software and applications up to date to protect IT infrastructures from known vulnerabilities. Insurance companies should implement a patch management process to ensure that updates are applied promptly and consistently.
- Access management and authentication: Insurance companies should implement access management policies to ensure that only authorized users have access to systems and sensitive information. This can include the use of multi-factor authentication (MFA) and restricting access based on users' roles and responsibilities.
It is imperative that companies in the insurance industry adopt a comprehensive cyber security policy to protect their IT infrastructures, sensitive customer data and to ensure compliance with data protection laws and regulations.
Cyber security in the insurance sector: The challenges
The insurance industry faces several future challenges that could have a significant impact on its growth and stability. Key cyber security challenges insurance companies face include:
- Digitization and technological innovation: Growing digitization and technological innovation are changing the way insurers operate and interact with customers. Adapting to these new technologies and integrating them into business processes is key to staying competitive.
- Climate change and natural disasters: The increasing frequency and severity of climate change-related natural disasters is putting pressure on the insurance industry. Companies will need to develop new products and strategies to address these emerging risks and manage the accumulation of exposures.
- Technological complexity: Insurance companies handle large amounts of data and use many different technologies, which makes protecting their information infrastructure a complex task.
- Increased Cyber Threats: Insurance companies have become increasingly vulnerable to cyberthreats, such as phishing attacks, ransomware and DDoS attacks, which can compromise the security of customer data and put the company's reputation at risk.
Cybersecurity is a critical challenge for insurance companies, but companies that adopt a proactive cybersecurity strategy and invest in employee training can significantly reduce the risk of security breaches and maintain customer trust.
