Change first or be changed — this is especially so with the Fourth Industrial Revolution shaking the foundations of industries around the globe. With the Internet of Things shifting businesses towards higher interconnectivity and artificial intelligence automating work processes, the insurance industry can either harness the transformative powers of these developments or lag behind clients’ rising expectations and evolving needs.
JLT Asia has reached out to our strategic partners to discuss the results of the four broad changes driving the transformation of the insurance industry in Asia.
The following key changes will be discussed in this 4 part series.
- Increasing quality of client servicing with InsureTech
- Opening of Asian regulatory environment
- Flattening of rates and increasing frequency of Natural Catastrophes
- Fast growth of cyber insurance
4. FAST GROWTH OF CYBER INSURANCE
Cyber risk is a fast emerging risk and the cyber insurance market will harden as the frequencies of cyber-attacks continue to increase.
Cyber risk is gaining more recognition. As businesses digitalise more aspects of their products, services and processes, they become exposed to higher levels of cyber risk. Cyber-attacks are becoming more frequent: the Asia Pacific proportion of global cyber-attacks increased from 27% in 2016 to 35.7% in H1 2017.
Compared to other regions, Asian companies are 80% more likely to be targeted by hackers and it also takes ~520 days for hacks to be discovered (which is almost three times higher than the global average of 146). Similarly, the Asia Pacific accounts for a third of global cybercrime cost at USD 171 Bn in 2017 (up from USD 81.3 Bn in 2015), a sign that businesses conversely become more vulnerable as they become more reliant on digital platforms or means. Globally, China is the second largest market affected by cyber-attacks, after the US.
“Every company has been or will be impacted by cyber risk,” said Emy Donavan, Global Head of Cyber, Allianz Global Corporate and Specialty (AGCS). “It is not over-hyped. If anything, it is under-appreciated because the threats are not always well understood. There are now multiple cyber threats to a company’s digital presence.”
At the same time, the frequency of cyber-attacks will harden rates. TWith the increasing frequency of cyber-attacks, premiums for cyber insurance will likely be pushed upwards. The average cost of cyber breach globally increased by 22.7% to USD 11.7 Mn in 2017 primarily driven by an increase in global cyber incidents (such as Ransomware and Notpetya), increasing awareness of organizations towards to cyber risks and increasing adoption of digital/IoT devices which adds to the exposure. By 2019, 86% of organizations in the Asia Pacific are expected to adopt IoT technology.
There is still a lot of potential for cyber risk management to grow in Asia. The current market penetration for cyber is still very low: the cyber insurance premium in Asia is only 6% of the global cyber insurance premium. This highlights a large gap between Asia’s share of insured loss and overall loss from cybercrime/cyber-attacks.
The Monetary Authority of Singapore predicts that cyber security market in the Asia Pacific would grow by 15% per annum till 2019, providing an opportunity for cyber insurers. According to AIG, cyber insurance penetration in Singapore is expected to increase from 9% in 2016 to 40% by 2020 with technology and telecommunications sector accounting for a higher share of the penetration.
Angela Kelly, CEO of Lloyd’s Asia, reflected that there has been a lot of talk and awareness about the growing importance of cyber risk management. “But Asian businesses have been quite slow at acting on this awareness and buying cyber insurance or getting cyber risk management services,” she added. “It is important for clients to understand the value of the insurance product rather than focus solely on price. A cyber loss, for example, is not just about immediate monetary losses, but reputational damage and other slow-burn costs as well.”
Read the first 3 parts of this series.
Read part 1 : Increasing quality of client servicing with InsureTech
Read part 2: Opening of Asian regulatory environment
Read part 3: Flattening of rates and increasing frequency of Natural Catastrophes
For further information, please contact Graham Edwards, Regional Director of Sales and Marketing at Graham_Edwards@jltasia.com