How can insurtech start-ups harness cyber insurance growth opportunities?
Cyber insurance has been touted as a “blue ocean” for insurtech start-ups as it holds a lot of potential, especially for those looking to scale up in this space. Global cyber premiums are expected to reach USD 22 billion by 2025, up from USD 9.2 billion at the start of 2022 as demand for coverage grows amidst increasing threats, according to Munich Re’s report.
Cyber risk continues to pose a major concern for organisations globally, as their reliance on information technology and digital devices grow. Network breaches, malware, and phishing attacks have significantly increased, bringing about rising cyber insurance claims and the need for new cyber insurance products.
In the event of a cyber-attack, insurers provide indemnification against liability and other losses as well as get involved in policyholder risk assessment, mitigation efforts, loss remediation and recovery activities. However, challenges such as the difficulty in defining and insuring cyber risks, the possibility of accumulation risk, and a lack of awareness of the need for insurance coverage for cyber risks, have hampered the growth of the cyber insurance market. Such challenges can be addressed by insurtech start-ups.
There is a shift now to a services-led and preventative approach to cyber insurance pointed out by The Digital Insurer chairman Rick Huckstep in an article. He has observed a new generation of hybrid cyber insurance startups with a security and cyber background. These insurtech entrepreneurs are developing technology platforms solely to provide a lower-cost, automated, digital insurance product, he noted.
According to him, the contemporary cyber insurance InsurTech firms are just a few years old but have already established cyber security monitoring and protection systems, as well as insurance. These firms include Coalition, At-Bay, Paladin Cyber and Zeguro – all based in the US.
There don’t seem to be any prominent cyber insurance InsurTech firms in APAC but that doesn’t mean that insurtechs in APAC are falling behind in the cyber insurance space.
Singapore-headquartered insurtech start-up Surer recently saw an opportunity to capture opportunities in the cyber insurance space. It partnered with specialist underwriting firm Delta Underwriting to give intermediaries quick and easy access to a suite of insurance products including cyber and technology liability.
In an official announcement on the partnership, Derren Teo, co-founder of Surer noted that increased awareness among SMEs on potential cyber threats and their impact has led to a rise in demand for cyber insurance products.
However, he noted that such products are not the simplest to understand and many SMEs rely on intermediaries for advice and arrangement of such. This is where Surer’s partnership with Delta seeks to help intermediaries to access cyber insurance products offered by Delta via the Surer platform.
Similarly, APAC insurtech Igloo recently partnered with Thai Paiboon Insurance, the non-life insurance under Thai Life Insurance Group, to launch personal cyber insurance products that cater to individuals or a family of up to four members. These products cover cyberbullying, e-wallet and identity theft, cyber extortion, and unauthorised fund transfers.
Another Singapore-based start-up Cyber Sierra offering cyber risk, compliance and insurance products backed by global brokers and insurers plans to launch more products to serve the risk and compliance needs of businesses in line with apt regulatory frameworks. The start-up recently raised an SG$ 4.3 million seed fund led by Leo Capital.
Building a sustainable insurance market
So how can the cyber insurance growth potential be capitalised on by insurtech start-ups in APAC?
Data is an area where insurtech start-ups who are data providers storing valuable raw data on cyber-attacks can step in. Enhancing the availability of data for cyber insurance underwriting is after all a major factor required to build a sustainable cyber insurance market, revealed an OECD report.
However, there is limited data for cyber insurance underwriting which is further complicated by the lack of claims experience, the dynamic nature of cyber risk as well as legislative and regulatory frameworks. This eventually hinders policyholders' comprehension of their insurance coverage needs and insurance firms' willingness to give substantial coverage, highlighted the OECD report.
In contrast, Insurtechs have combed through their massive data sets to identify cyber-security factors that affect risks, such as email security measures or the consistency of software patches. They have then incorporated those into the details of insurance policies, revealed Corvus Insurance CTO Vincent Weafer in a Forbes article.
Insurtech start-ups have a lot of potential to grow in the cyber insurance space with their data-providing capabilities coupled with a services-led and preventative approach to cyber insurance. As cyber-attacks evolve and grow in magnitude, so will cyber insurance products and insurtechs looking to grab opportunities.