Cyber-crime is a perpetual worry for every enterprise business. All it takes is one successful cyber-attack to cripple a business from a financial and operational standpoint. Not only does this keep business leaders up at night but their insurance companies as well.
What has made cyber such a unique challenge for insurers? In a word, precedent. Insurers do not have a lengthy history of cyber policies with which they can compare against new policies. This makes it extremely difficult to evaluate risk and potential exposure.
The Challenges Associated with Cyber Coverage
It is not simply the lack of precedent that is giving insurers fits but the sheer complexity of each individual case. Unlike property damage, which can be easily quantified, there are many nuances and layers to cyber-crimes. All of the following must be under consideration:
- What is the financial impact of a cyber-attack on a company’s reputation?
- What is the cost of a business stoppage due to a cyber-attack?
- What is the potential exposure of a data breach?
- What is the cost of lost data?
These are just a handful of considerations every insurer must take when establishing coverage, premiums and potential risk. When you account for the differences between each insured company, you realize just how unique each scenario is.
The Growing Need for Cyber Coverage
Cyber-attacks have grown by 600% since the onset of the COVID-19 pandemic. While companies are certainly aware of the danger that lurks behind the computer screen, many would be hard-pressed to tell you whether their insurance coverage sufficiently covers them from those dangers. For that matter, neither can many insurers.
Because so many policies were created and signed prior to the explosion in cyber-crime, many policies do not mention cyber at all. As a result, cyber is neither covered nor explicitly excluded from coverage. This has led to a “silent cyber” phenomenon where insurers may find themselves exposed to a significant amount of unknown risk. As a result, insurers are stuck reviewing all existing policies for coverage and amending them accordingly. Either that or leave them all up to chance.
The problem, of course, is that reviewing an exorbitant number of policies — each of which contains upwards of 100 pages of dense insurance verbiage — is not a quick or easy task to address. Done manually, it can take hours just to review a single policy. When automated, it can take far less time, but that ultimately depends on the artificial intelligence approach you take.
The Cyber Insurance Opportunity with AI
Cyber has put insurers in a difficult position, but it has also given them an opportunity for significant growth. Whether or not they seize this opportunity comes down to the efficacy of their claims process.
The biggest impediment to automating the claims process has long been the complexity of the claims themselves. Claims handlers have a unique, domain-specific knowledge of insurance language that enables them to read and understand the entirety of a policy. Unfortunately, scaling that knowledge across thousands of policies is extremely difficult and requires the right artificial intelligence technology. That technology is natural language understanding.
Natural language understanding (NLU) enables you to read knowledge-intense policies and answer important questions such as:
- Is cyber mentioned in the policy?
- To what extent it cyber mentioned?
- Is there misalignment inside the policy that might bring about litigation?
By identifying all of this information and aligning it to current standards, you have the core elements necessary to bring a final decision to a senior underwriter. When you have thousands upon thousands of existing policies to review and realign to your new cyber standards, having a claims process with this level of deep embedded knowledge is critical to minimizing risk across your portfolio.
To learn more about how AI is helping insurers adjust to the evolving cyber insurance market, listen to expert.ai Head of Sector Strategies for Financial Services Pamela Negosanti on “The AI in Business Podcast” hosted by Emerj.