11 June 2018Insurance

Airmic survey claims cyber risks now a top concern

Cyber and IT-related risks have emerged as the top concerns for members, according to the latest Airmic survey. It is also the area where risk managers most want to see the insurance industry extend its offering.

The survey was carried out in partnership with AXA Corporate Solutions, JLT Specialty and Longitude. It took place in April, with responses received from 137 Airmic members.

Airmic said that cyber-risk was ranked among the top three concerns by 39 percent of respondents, second only to reputation at 41 percent. However, when they were asked the likely position in three years' time, cyber moved to the top spot, cited by 43 percent. Furthermore, another IT-related risk – loss or theft of personal data – is currently the third most pressing concern, chosen by 33 percent.

Many risk managers believe that their ability to respond to cyber-risk is falling short. Just 33 percent are confident that the main cyber-risks have been identified and quantified. Only 22 percent strongly agree that the board has sufficient knowledge and understanding of cyber-risks. When it comes to third-party cyber-risks, the picture is darker still, with only 15 percent strongly agreeing that these are being managed in their organisations.

Asked where they would like to see insurers develop services in response to data breaches, respondents showed an overwhelming preference for support with responding to the data loss, with 58 percent preferring this option. The focus is also on securing data breaches in the case of interruptions to business, with 48 percent calling on insurers to do more in this area.

Transferring risk through insurance is favoured for a number of risks whose origins sit outside the direct control of the company, and which are therefore harder to mitigate directly. Natural catastrophe (68 percent) and terrorist attack (63 percent) belong in this category. Cyber-events, both those causing business interruption (49 percent) and loss of data (45 percent), are also singled out for transfer.

Business interruption more generally was cited as a top-three risk by 18 percent of respondents. A majority (57 percent) want the insurance sector to focus its product development efforts on covering this area.

The threat of competitors using new technology and business models to gain market share is another rapidly emerging concern, chosen by 21 percent - with 30 percent expecting it to feature in three years' time.

The level of trust in broker models and practices is still disappointing, but has improved over the last three years. In 2015 seven percent of members strongly agreed that they had trust in the transparency of their broker's business model – this is now reported at 21 percent. Trust in broker placement advice, particularly when recommending their own services, is at a positive 71 percent of those strongly and slightly agreeing.

Risk managers show the most trust in brokers’ confidentiality, where only 8 percent express a strong lack of trust. Even here, just 40 percent strongly agreed that they trusted brokers to maintain confidentiality. This is low given the centrality of this issue in assuring strong business relations.

Airmic technical director and deputy CEO Julia Graham said the findings underlined the message that insurers and their buyers need to adapt to the fast-changing business environment. “Intangible risks dominate the concerns of our members, and are much less well accommodated by the insurance industry than tangible risks. This is something that underwriters and insureds need to develop further as a matter of urgency,” she said.

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11 June 2018   The commercial insurance sector must adapt to the fourth industrial revolution if it is to remain relevant in five to ten years' time, said Airmic CEO John Ludlow.