The Role of Insurance in Today’s Cyber Crimes

In this new era where technology prevails makes everyone go digital for the simple fact that it facilitates our life and makes us competitive to others. As an effect, a new type of threat as mentioned in my previous blog “Insurance Products for Data Liability” is affecting everyone going digital today. Such threat is commonly called “cyber crime” and is rapidly increasing as technology continues evolving. Nowadays, anyone using technology such as individuals, organisations, businesses, and even governments are exposed to attacks such as ransomware, identity theft, theft of sensitive data, theft of intellectual property, and spam  messages. Even though technology developers continuously create countless softwares for different types of threats, hackers end up in one way or the other decode the security. The way developers answer to that is by updating their softwares. As a matters of fact, no everyone who uses technology today, frequently updates their security protection softwares or neither have enough protection or in the worst cases have no protection at all. For that simple reason, high executive in the world of insurance services have been commenting how insurance can fix that gap between privacy and protection.

An insurance coverage does not just transfer the risk of cyber crime to the insurer but also keep the insured on track with the best in software protection available. You may wonder, what business does an insurance company has showing their clients how to best protect themselves against any sort of risk? The reason is because the insurer wants to lower that risk to the minimum in order to generate as much profit possible. It is the same as when an insured has home insurance and someone robs his or her place, the insurer won’t pay the indemnity as long as the client comply with all the security measure stated by the insurer. Thus, the insurance industry has and will continue having but in a more important way the role of educating anyone who buys their cyber security protection services.

In my opinion, the way I see cyber liability insurance in the future is like today we see with car insurance in first world nations like Canada or the US (everyone is obliged to have it). You may wonder again, way? That is because cyber crime can cause tremendous damage to a country’s economy and a good education on the topic of cyber security makes markets within a country less vulnerable to cyber attacks. For example, on the 2014 Sony’s hack that cause a huge damage to the company, that damage did consequently affect the economy but in a really nonsignificant way. However, instead of being one single cyber attack to a company, imaging 20 or mare similar attacks to other major corporations within a country, that would be scary for their economy. According to an article written by Michelle Maisto, it says that an US market research called IDC said that cybercrime has cost the global economy $445 billion in the recent years and that figure is expected to increase.

Nevertheless, a Bloomberg article written by David Sax, suggest that the best insurance to be protected against cyber crime may be analog. It says that there is too much risk on connecting all our devices to the internet because the internet is easily hacked. Therefore, we should have a back up with analog equipments because they cannot be infected by malware and commandeered by hackers. Even though I agree with this argument, that the internet is still too weak for us to connect every single devise with because a hacker is capable of using our devises against us, I still believe that insurance coverages is a good way for everyone to integrate into this rapidly evolving digital age.

Insurance Products for Data Liability

One of the biggest threats companies are facing today is cyber crime and that is given to their needed and unstoppable integration into technology. Today, the need for a company  to integrate new technology into its business is as important as assuring client satisfaction toward their products or services. That’s because competition is always high and new technologies can facilitates a business’s activities which consequently leads to higher profits. However, it is important to be aware that new technologies can also bring an entire company to bankruptcy if there is not a fully understanding of how this technology works. For example, any sensitive data that that is stored online or more commonly know as the “cloud” can be stolen by a hacker and such risk can be prevented by setting security measures such as encryption. Nonetheless we also know that most security measure that can be used today to protect sensitive data may sometimes be useless because hacker are still capable of decoding it. One example to that is what happened in the mid of 2014 when the giant US company “Sony” was hacked and lost millions of dollars. After that mayor incident that costed huge finical losses and that putted this corporation at risk, companies have become more aware of the issues and consequently more aware of an insurance product more commonly known as “cyber insurance“.

Cyber insurance is an insurance product that has been available from at least 10 years. However it seemed as though it did not exist in the market until this recent mayor hacks that have occurred around the world. Since the the Sony’s hack cyber insurance has become a rapidly growing business. The concerns of having devastated fanatical losses after integrating so much technological innovations that were supposed to result in greater profits troubled the mind of those that were running companies. Today, both publicly traded companies and private ones protect their businesses with cyber insurance because both customer and investors demand it. Investors care about profits while customers care about their data being protected. For Instance, this year in Singapore, AIG announced that more firms were expected to seek Cyber insurance. Currently, Singapore’s economy is growing at a satisfactory pace and before investors put more money in the market, they need to see that it is protected against risks such as cyber hacks.

Cyber Insurance, as a term, is used to call a range of different data liability coverages just like the word cyber is used to describe a broad range of information security related tools, processes, and services. Currently, Cyber Insurance include four (4) different coverages. Data breach or privacy crisis management covers basically certain expenses caused by cyber crime. Multimedia or media liability covers damages or violations to the media such as certain defacement of webpage and intellectual property rights. Extortion liability basically cover certain expenses related to extortion. And for last, network security liability covers expenses arisen by third parties damages from cyber crime.

As technology continues evolving, the need and variety for Cyber Insurance coverages will continue to increase as it has all this passed years but faster as we keep integrating more into this digital age.

The IoT (Internet of Things) and Insurance

In today’s world, we are living in a Big Data era and it is all thanks to the invention of a wireless computer network called “internet”. Since its creation, human evolution has gone in a more faster pace than ever imagined and that’s because of the huge amounts of data it has allowed us to collect. According to a Youtube video named What is Hadoop?, it says that 9o% of the world’s data has been generated from the years 2010 to 2012. So much information has allowed us to be where we are today in terms of human achievements and collection of knowledge. However many issue has been raised about the complexity of so much data, its accuracy, that it takes high storage capacity to safe the data and data scientist to analyse it, and the need for fast analyzation process. Consequently, these issues has lead industries and organisations to use programming frameworks like Hadoop. It allows them to store big qualities of data online just like storing in the cloud but with even much more space, and it processes request for information and gives you an image spread across many hundred of files in less than 24 hours. Thus, Hadoop is a programming framework that basically leaves the analysis of Big Data on its hands rather than on the hands of a data analyst scientist.

Since the last recent years, both the internet and Big Data has led to the creation of a new term called the Internet of Things (IoT). What is mean is that every physical object embedded with electronics, software, sensors, and network connectivity is enable to collect and exchange data. Today new innovations that we use in our daily life like smart phone or wearable  devises continuously collect information from us. In this way the insurance industry as many other industries and corporation has found these technological creations the primary source to increase their profitability and or better result performance.

Currently insurance companies are already applying the Internet of Things into the system of their business for the sole reason that it makes them more knowledgeable and in insurance that’s equal to better return in earnings. One of the most popular innovations that today is benefiting most business of this industry are wearable devices like the Fitbit or the Apple Watch. Insurers either sell these devises with discount or giving them up for free to their customers and encouraging them to increase their healthy habits in other to decrease their premium payments. In this way insurers monitor their clients performance through the device as it continuously send information about each clint that wears them. As these wearable devises, there are many other devises that insurance is using today to track their clients so there can either increase or decrease premiums more accurately. In car insurance there are application for smart phones and a box that can be fitted inside a vehicle that can send information about the client directly to the insurer as well in exchange for lower premiums.

Beside these new technological creations that are currently becoming part of the insurance industry, there are also new innovation that are by now just projects which are expected to become part of this industry in the following years. Given to how important more accurate and continuous update of data is for the insurance industry, insurers are becoming responsible for the creation of new innovations, for instance by partnering with businesses that creates technologies. Few of these technologies are internet-connected door bells which record individual who approaches the door of a house and update it to the cloud, real time weather data, drones to inspect houses just like an adjuster does (person in charge of investigating a claim). Like these projects there are many others that are currently being developed by insurers and technology developer companies.

Regulation on Big Data

In history, there have always been refusal to innovation by respected and well educated people. Following to the creation of the printing press in the 15th century, monks viewed as a threat to their control over learning books that were easily available and weren’t accepted by the church. Similarly, a respected scientist from Switzerland feared the overload of information by the printing press could cause harm and confusion to people. In the 18th century when news paper were more widely available, it was thought that it would isolate readers. When education became more widely available  in the 19th century, it was thought  that it wold cause harm to mental health. Even when radio was invented, it was believed that it would distract children, and after with the invention of television, it was thought to cause harm to radio, reading, and many other things.

In the most resent decades, concern from society leaders have shown that we have not changed our way of thinking when it come to innovations in technology. It has been thought that Email could hurt our IQ, that Tweeter could harm our moral values, that Google could make us stupid, and as we integrate ourself to the era of Big Data, we will lose our privacy. As we all know, most of these believes and thought about our technological evolutions have been proven wrong. However, we are still wondering how much can Big Data Analytics can affect our personal information. Since before the creation of the internet, governments specially from the US, have started to make legislation in order to protect customers’ personal data. Many of those legislation which still exist today were created based technologies which are outdated today. In most countries, the current privacy laws still date from the 70s and 80s, when the World Wide Web did not yet exist and we were still using landlines to call each other. The reason why governments from any part of the world can not make new legislations that go in accordance with the current technology is because a legislation takes time to make. As it happened in the The Netherlands as a great example where a cookie-law completely missed its goal after being passed by the legislative and had to be changed within 1 year. This type of examples trying to regulate Big Data , have not just happened in The Netherlands, but also in many other different countries. Therefore, that’s a prove that shows that government cannot keep up with regulations give to fast technology evolves today.

Nowadays, we usually ask ourselves what would be the solution for Big Data Analytics in order to stop corporations such as insurance form doing whatever they want with their customers’ data, or stop cyber criminals from stilling it. Perhaps the best way to start is from the customers’ side as customers put pressure on corporations by letting them know that if their data is not being fully protected, they will consequently stop buying their products. However that is currently happening today. Base on an article written by Mark Van Rijmenam call “Why Big Data Privacy Will Be Self-Regulating“, he writes that organisations are highly cautious today and are starting to find wrongdoings with their Big Data Analytics risking for business. That’s because of the World Wide Web  which makes people interconnected with each other. It helps anyone to easily organise a boycott against an entire corporation and leave it out of business in a matter of days.

The Management of Big Data and its Effect on Society

In insurance as in many other industries, knowledge is the most valuable asset a business can have. For insurance, knowledge has always been the rock that sustains the business. Nonetheless, since the invention of the internet by the end on the twentieth century, it started making information more widely available and at a highly cheaper price. Since that time, technology has started to evolve faster than ever before in human history. As an effect, that was the beginning of Big Data, and like I mentioned in my previous blog, this new way of collecting information has had both positive and negative effects on society.

As in many other different businesses today, the management of Big Data in insurance has had a huge inpact on society as a whole. However, both employees and customers of a business are the first ones affected by it. Such impacts has been both positive and negative for both groups. A positive impact that seems to satisfy many customers is personalised prising. In the article “Protect your privacy online, and see better prices doing it” by Anita Balakrishnan she says, “The prices you see while shopping on the Web aren’t always the same as the deals displayed to your spouse, neighbours or co-workers”. The way this personalised pricing works is by collecting relevant consumers’ data and setting premiums based on consumers preferences, and level of risk. Another benefit is that some insurance businesses are currently offering their clients the ability to lower the premium cost by making them share more personal data with their insurer. This works through new innovative technologies like the wearable watches such as Apple Watch or Fitbit. These devices help collect current costumers’ health information, and in return the insurer offers discounts by setting goals and become healthier. As these wrist wearable devices that collect customers’ health data, there are also devises that collect data from automobiles. According to Bernard Marr’s article, the insurer creates incentive to the customer to apply these devices in their vehicles in order to obtain data, and in exchange they offer premium discounts.

Although this information shering looks like a big deal for many customers, there are some concerns about what other uses the insurer gives to that data. According to Anita Balakrishnan in her article she said that discrimination is one factor that can occur as a result of so much knowledge. For instance science has shown that, unfortunately, the biggest decider of our state of health is often the genetic makeup we are born with. Therefore an insurer can charge a higher premium to someone whose state of heath is weak because of its genetic makeup.

On the other hand a similar case also happens to employees. Based on Valentina Zarya’s article, “Employers Are Quietly Using Big Data to Track Employee Pregnancies“, she says that employers can know their employees more than anyone else. In the article, she talks about a company called Castlight which has the ability to gather workers’ medical information, uses that data to identify segments of an employee population that are about to make certain decisions. Castlight can tell who is at risk for being diagnosed with diabetes, who is considering pregnancy, or who may need back surgery. So what insurers do is buy this data from this third party and take take better decisions about who to fire, promote, etc.

As technology continues evolving, Big Data will continue becoming a more common topic among society. Big Data can be used to enhance society’s lifestyle, and become a more advance species than we are today, but it can as well be used as a source of power capable to know and dominate anything, and that’s how negative it can become for society. Today, for an insurance company, Big Data means stability for the business, and only they decide how to use it, whether it is for the better good in society, or only for profitable proposes.

Big Data Analytics and the Insurance Industry

Today more than ever, technology has broken into barrier that in the past seemed impossible to take down. In all areas, technology has given eyes to explore a huge variety of information which consequently has affected society in both positive and negative ways. As technology continuous evolving throughout the years, more and more information is being gathered and with more ease than ever before. All these technological innovations that today have made us more knowledgeable about almost everything, have consequently led us to the creation of the term “Big Data Analytics” which means extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behaviours and interactions. So why Big Data Analytics has had such a significant impact on the insurance industry?, that’s because this industry works on the principle of risk.

The only way the insurance business can be profitable is by having good knowledge about their clients’ risks. Based on that knowledge, the insurer set the premium prise (monthly amount paid by the customer), and the indemnity (amount paid to the customer when loss has occurred). So basically, the insurer assess its clients’ risks in order to know weather it may be convenient for the business to afford providing coverage to specific clients. However, it is important to consider that the insurance industry’s process for collecting information from its clients since its beginning of time has been pretty effective. That is the reason why this industry still exist today. Nevertheless, these changes that technologies are bringing to the insurance business are optimising its functionality causing revenues to increase by troubleshooting inconveniences that seemed impossible to even control before.

Basically, the task of technology is to collect the data, while the task of Big Data Analytics is to keep it together as one set, read it, and understand it. The analysis of big data is allowing insurers to know its client better as to weather they are likely to be at risk or exposed to have any loss at any moment. Such allowance makes client satisfaction increase because it solves their issues in a proactive way. Based on  Alan Walker, senior vice president of Capgenimi Consulting (one of the world’s foremost providers of consulting, technology, and outsourcing services), there are 5 opportunities for insurers to improve costumer satisfaction through Big Data.  The first area is personalised prising, which allows the insurer to set premium prises based on clients’ particular needs. The second area is increasing agent’s effectiveness. Such action would allow the agent to collect more information from the client at the moment of interaction in a more effective way. For instance, the creation of a software that would make information collection easier and more effective, and that also would keep the agent highly informed about the client.  The third area is improvement of online experience. Alan Walker mentions that fewer than 30% of customers are satisfied with insurers online channels. So what some insurers are doing, is tracking costumers’ behaviour on their websites and amending it accordingly. The fourth area is value added services, so the question is, what value can be added to a policy? Data collection can allow insurers to know what possible risk their clients may face or are about to face, thus they can inform the customer about  what to do to prevent a risk or warn them that they are about to have a loss. The fifth area of improvement is finding new markets or customer’s segments. In terms of protection, Big Data can allow an insurer to find out what other needs beside the current ones their clients may have. In this way, new policies can be created to satisfy clients’ future needs. Thanks to technology, all these areas of improvement are possible today.

However, the question is, are clients really comfortable with all these data that insurers collect from them? It seems that at least most clients are. According to Bernard Marr, a data expert, in his article “Big Data: Why Insurance Will Never Be The Same Again“, he talks about privacy. In the article he mentions that a company’s SVP of insurance marketing and strategy, said “customers don’t mind giving up some data if you’re transparent about what data you’re asking for, and they are getting real value back for it”.