Recently, many leading insurers have deployed transformative solutions to improve their cyber products. With the predicted cyber insurance market double to $29 billion by 2027Let’s examine what makes market-leading cyber claims management.
In this blog, we explore the complexities of responding to cyber claims, the essential skills claims adjusters need, and the actions insurers must take to achieve excellence in cyber claims management.
The complexity of cyber damage
The most comprehensive cyber protection covers a broader range of risks than most other insurance products:
- First-party coverage: This includes damage to devices, damage to network, damage to physical property and damage to digital assets. In addition, damage or theft of intangible assets, monetary theft and costs associated with recovery, recovery and remediation are covered. Financial losses due to business interruption, lost business opportunities, reputational damage, ransomware and extortion are also included. In addition, costs associated with investigations, notification of affected third parties, and damage to intellectual property such as patents and trademarks are covered.
- Third Party Coverage: These coverages include contractual and legal liability, regulatory proceedings and multimedia liability. They also include civil damages, indemnity, loss of payment cards, errors and omissions, technical professional liability, other professional liability, and network security and privacy liability.
When the policyholder of a comprehensive cyber product is a large multinational corporation with both B2B and B2C customers, dealing with a potential major loss becomes extremely complex for claims adjusters. Cyber incidents, similar to oil spills, are catastrophic in nature, have no geographic boundaries, and are constantly evolving and unpredictable. Cyber breaches can have serious impacts on businesses, societies, and critical national infrastructure, including hospitals, water and wastewater systems, and airports.
However, the complexity goes even further. Cyber claims pose unique challenges for today’s claims adjusters as the claims are complex and technical, involving IT systems, both tangible and intangible assets, cybersecurity protocols, digital forensics, and the ever-changing regulatory and legislative landscape related to data protection, AI protections and data protection laws in all affected jurisdictions.
Additionally, a cyber claims adjuster must be able to lead and manage a diverse group of specialists ranging from forensic IT experts, data experts and forensic accountants to credit monitoring experts, infringement consultants, public relations experts, crisis management experts and ransomware attack experts.
The Skills of a Cyber Claims Adjuster
The skills of a cyber claims adjuster are diverse and require a detailed understanding of various aspects:
Knowledge requirements: A cyber claims adjuster must have advanced, industry-recognized qualifications and typically have a background in errors and omissions (E&O), trade credit, political risk and/or crisis management. They will need working knowledge of the application of first- and third-party cyber coverages, reservations, valuations and risk management processes, typically gained from previous work in cyber claims or broker representation.
Experience Requirements: The industry faces challenges due to a limited talent pool. It is critical for claims adjusters to understand the roles and responsibilities of the various professionals involved in cyber claims. Their practical experience is critical to the effective supervision and management of these professionals to ensure rapid response to claims, effective mitigation measures to prevent further losses, and complete claims settlement. Cyber claims have grown in complexity and volume, but many claims adjusters come from non-core businesses. A key competency that is often missing is a mastery of IT systems, cybersecurity protocols, digital forensics, intangible assets and a deep understanding of the ever-evolving regulations and laws in the areas of IT, AI, GDPR and consumer protection. This is particularly important if the insurance covers technology-based businesses, where coverage is often tailored and niche.
Operational responsibilities: Claims adjusters must effectively determine the existence, cause and extent of a breach and manage key cyber claims management activities. This includes selecting and managing the appropriate incident response team, assessing ongoing or completed breaches, assessing the impact on the customer’s business, and assessing breaches of cybersecurity protocols. This includes responding in accordance with applicable data protection and data protection regulations, identifying and responding to fraud triggers, and providing feedback on actuarial risk controls and actuarial tables.
Knowledge of customer segments: Competent knowledge and experience with a range of customer segments, from SMEs to multinational and large corporate clients, is also essential for a cyber claims adjuster. Because cyber is such a rapidly evolving product and still marginal compared to many other lines of business, insurers face the difficult question of whether to organize their cyber claims team as an industry CoE or stick with existing CoEs focused on SMBs, mid-market, multinational customers, etc.
New risks and challenges
The task of determining the existence, cause and extent of a breach is becoming increasingly complex due to extensive cyber insurance coverage, the rapid development of technology and data platforms, the catastrophic and systemic risks associated with breaches, and the impact of genetic AI. Gen AI offers new opportunities and challenges, improving capabilities for both cyber attackers and cyber defenders and leading to more complex attacks almost daily.
The strategic decisions to become a market leader in cyber claims
In summary, there are four key components to consider:
- Insurers need a claims application that helps adjusters effectively manage the incident response team and experts. The application must be suitable for cyber use, which requires comprehensive master data management to orchestrate the 100+ relevant cyber claims data points as well as expert-specific authorization access to documents.
- Insurers need a comprehensive and ongoing development program to remain proficient in dealing with evolving cyber risks, technological changes and, in particular, the opportunities and challenges brought about by Gen AI.
- Insurers need a comprehensive cyber saferoom that provides a safe space for pre-incident consultation and training, incident response planning, notification services, etc. The safe room must have the proper guardrails in place to support collaboration with the independent infringement attorney.
- Insurers need a continuous feedback loop of claims master data that flows into the actuarial tables and risk controls in underwriting. Market-leading insurers achieve this with a scalable infrastructure and architecture so that technical pricing for all variables occurs in real time based on claims history.
