Recently, many leading insurance companies have introduced innovative solutions to enhance their cyber insurance products. The cyber insurance market is Double to $29 billion by 2027So let’s explore what is market-leading cyber claims management?
In this blog, we take a closer look at the complexities of responding to cyber claims, the essential skills required of a claims adjuster, and the steps insurers must take to achieve excellence in cyber claims management.
The Complexity of Cyber Claims
The most comprehensive cyber insurance policies cover a wider range of perils than most other insurance products.
- First Party Indemnification: This includes damage to devices, damage to networks, damage to physical property, and damage to digital assets. It also covers damage or theft of intangible assets, and theft, recovery, restoration, and repair of funds. It also covers financial losses due to business interruption, loss of business opportunity, reputational damage, ransomware, and extortion. It also covers costs associated with investigations, notification of affected third parties, and damage to intellectual property such as patents and trademarks.
- Third Party IndemnificationThese indemnities include contract and statutory liability, regulatory proceedings, and multimedia liability, as well as civil damages, indemnity, loss of payment cards, errors and omissions, technical professional liability, other professional liability, and network security and privacy liability.
When the insured for a comprehensive cyber product is a large multinational corporation with both B2B and B2C customers, handling a potential large claim becomes extremely complex for claims adjusters. Cyber claims, like an oil spill, are inherently catastrophic, do not recognize geographic boundaries, are continuously evolving and unpredictable. Cyber breaches can have significant impacts on businesses, society and critical national infrastructure such as hospitals, water and wastewater systems and airports.
But the complexities go even further: cyber claims pose unique challenges for today’s claims adjusters due to the complex technical nature of the claims, including involving IT systems, both tangible and intangible assets, cybersecurity protocols, digital forensics, and the ever-changing regulatory and legislative landscape around data protection, AI protection and privacy laws in all affected jurisdictions.
Additionally, cyber claims adjusters must be adept at leading and managing a diverse group of experts, ranging from IT forensic experts, data specialists and forensic accountants to credit monitoring experts, legal breach advisors, public relations experts, crisis management experts and ransomware attack experts.
Cyber Claims Adjuster Skills
The skills of a cyber insurance claims adjuster are multifaceted and require an in-depth understanding of many different aspects.
Knowledge Requirements: Cyber claims adjusters must be highly qualified in the industry and typically have experience in errors and omissions (E&O), trade credit, political risk, and/or crisis management. Adjusters will typically need working knowledge of first- and third-party cyber coverage application, reserving, valuation, and risk management processes from a previous role in cyber claims or broker advocacy.
Experience Requirements: The industry faces challenges due to a limited talent pool. It is crucial for adjusters to understand the roles and responsibilities of the various professionals involved in cyber claims. Their work experience is essential to effectively supervise and manage these professionals and ensure a prompt response to claims, effective mitigation measures to prevent further losses, and full settlement of claims. Cyber claims are growing in complexity and volume, yet many of the adjusters come from ancillary business lines. Key skills that are often missing are proficiency in IT systems, cybersecurity protocols, digital forensics, intangible assets, and a deep understanding of the ever-evolving regulations and laws across IT, AI, GDPR, and consumer privacy. This is particularly important when the insurance is targeted at technology-based businesses, where coverage is often customized and niche.
Operational Responsibility: Adjusters must effectively determine the existence, cause and scope of a breach and manage key activities in cyber claims management, including selecting and managing appropriate incident response teams, assessing ongoing or completed breaches, assessing the impact on customers’ businesses, assessing breaches of cybersecurity protocols, responding in compliance with current data protection and privacy regulations, identifying and responding to fraud triggers, managing underwriting risks and providing feedback to actuarial tables.
Customer segment knowledge: It is also essential that cyber claims adjusters have strong knowledge and experience across a wide range of customer segments, from SMEs to multinationals to large enterprises. Because cyber insurance is a rapidly evolving product and is smaller in scale than many other lines, insurers are faced with a difficult question: whether to organize their cyber claims teams as a line of business CoE or follow existing CoEs focused on SMEs, mid-market, multinationals, etc.
New risks and challenges
Determining the existence, cause, and scope of a breach is becoming increasingly complex due to the broad scope of cyber insurance coverage, the rapid evolution of technology and data platforms, the catastrophic and systemic risks associated with breaches, and the impact of Gen AI, which brings new opportunities and challenges, enhancing the capabilities of both cyber attackers and defenders, resulting in more sophisticated attacks almost daily.
Strategic Choices for Leading the Market in Cyber Claims
In conclusion, there are four key elements to get right:
- Insurers need a claims application that supports adjusters in effectively managing incident response teams and experts. The application must be fit for purpose for cyber, which means comprehensive master data management to organize 100+ relevant cyber claims data points, as well as access to expert-specific documentation.
- Insurers need a comprehensive and ongoing development program to stay adept at evolving cyber risks, technological changes, and especially the opportunities and challenges posed by Gen AI.
- Insurers need a comprehensive cyber safe room that provides a secure space for pre-incident advice and training, incident response plans, notification services, etc. The safe room should have appropriate guardrails to support engagement with independent legal breach counsel.
- Insurers need a continuous feedback loop of claims master data to inform actuarial tables and underwriting risk management. Market-leading insurers achieve this with scalable infrastructure and architecture, allowing loss history to inform technical pricing across all variables in real time.
