Insurance companies are worried more than ever about cybersecurity, which is rated one of the top three risks the global industry faces for the first time in a recent survey.
Insurance Banana Skins 2017, published last week by London-based think tank the Centre for the Study of Financial Innovation, is the sixth biennial survey of its kind, conducted with support from professional services firm PwC. The survey, of 836 insurance practitioners and observers in 52 countries, found growing levels of anxiety in the industry. Globally, the top 10 risks were rated as follows (with the rating from the last survey in 2015 in brackets):
- Change management (6)
- Cyber risk (4)
- Technology (-)
- Interest rates (3)
- Investment performance (5)
- Regulation (1)
- Macro-economy (2)
- Competition (-)
- Human talent (15)
- Guaranteed products (7)
“The three highest risks form a cluster around the theme of technological change and industry response,” reads the survey report. “The top position occupied by change management reflects concern, even doubt, about the industry’s ability to address the formidable agenda of digitization, new competition, consolidation and cost reduction which confronts it.”
In the U.S., Britain, Australia and Denmark, cyber risk was rated No. 1. It was also rated the top risk by the reinsurance sector. The increasing cyber anxiety is driven both by concerns about insurers’ own digital security, as well as by fears about the growing costs of paying out on policies. “Cyber risk … has also risen sharply on concern about both crime and underwriting risk,” reads the survey report.
Respondents were also asked how well prepared they thought the industry is to handle the risks they listed. “On a scale of 1 (poorly) to 5 (well) they gave an average response of 3.02, a sharp decline from the previous year’s 3.20, suggesting a higher level of anxiety about the industry’s ability to weather a difficult business environment,” the report continues.