Industry Case: Redefining Cyber Risk Assessments with AI
How Enterprises, Brokers, and Underwriters Get Peace of Mind Amid Ever-Evolving Risks
On March 28, Amit Arora (VP - Head of Product, Cyber Risk Solutions) joined me for the first live episode of “What’s the BUZZ?” with a dedicated industry focus: Insurance. For example, cyber risk insurance has become a critical aspect of safeguarding businesses from potential threats. With the increasing complexity of cyberattacks and the sheer volume of new threats emerging daily, traditional methods of risk assessment struggle to keep up. AI is revolutionizing cyber risk insurance. It offers more accurate risk assessments, streamlines processes, and benefits enterprises, brokers, and underwriters alike. Discover how AI is transforming the way we approach cyber risk assessments and delve into the unique challenges of implementing AI in this sector. Here’s what we talked about…
» Watch the latest episodes of “What’s the BUZZ?” on YouTube or listen to it wherever you get your podcasts. «
AI's growing potential in cyber risk insurance
Cyber risk insurance helps transfer risk your risk to an insurance company that calculates the probability of something bad happening and charges you a premium based on that. Cyber risk insurance is different from other types like life and car insurance because it deals with more unknowns and constantly evolving threats. For life and car insurance, there's plenty of historical data to help calculate premiums. Factors like age, gender, health, and driving history can be used to create accurate models.
» Everything goes into the pricing models for life insurance premiums calculations. […] And it's been going on for ages. It's a very mature use case. When it comes to cyber, though, how do you measure cyber risk? «
— Amit Arora
However, cyber risk insurance is more challenging because there's no simple way to measure the risk a company faces from various cyber events, such as ransomware attacks or cyber extortion. The challenge in using AI for cyber risk insurance is that it needs to be trained on enough data to make accurate predictions. However, historical data on cyber claims might not contain information about newer or emerging threats. Despite these challenges, Amit emphasized the importance of AI's potential in this area to improve risk assessment and protect businesses from the growing threat of cyber attacks.
A smarter approach to cyber risk assessments
Cyber risk experts are always trying to improve the customer journey. To figure out the best policy, insurance companies need a way to determine the level of cyber risk for each customer. They start by looking at the industry the customer is in. For example, banks and payment companies face very high risks due to the financial nature of their businesses. Healthcare and hospitals are another area with unique risks. Once they've examined the industry risk, insurance companies then focus on assessing the specific risks for each client. Currently, this is done by having clients fill out long questionnaires about their cybersecurity practices. Based on the responses, underwriters can then decide how much risk the company has and what insurance premium to charge. However, this process can be improved, making it more efficient and accurate. One way to do this is by looking at a company's cloud telemetry and configurations. This can help determine how strong and comprehensive their security measures are. For example, if a company stores large amounts of data but doesn't use a scalable and secure database, they may face a higher risk of a cyberattack or ransomware in the future.
» We are moving away from saying, if you belong to this industry, this is your inherent risk and therefore this is your premium. It's a starting point, but then you definitely need to do a client-specific risk assessment […]. And questionnaires are not just sufficient for that. «
— Amit Arora
By teaching models to assess risks based on actual configurations, insurance companies can provide more tailored and accurate premiums for their clients. This approach moves away from a one-size-fits-all industry risk assessment, instead focusing on the specific risks faced by individual clients. Insurance companies can provide more accurate and fair premiums for their clients, ensuring that they're properly protected against the ever-evolving world of cyber threats.
How AI streamlines processes and boosts security for stakeholders
There are three main personas involved in cyber risk assessments: (1) Enterprises are looking for protection and trying to transfer risk. They can gain a better understanding of their security and how to improve it. (2) Brokers act as the first point of contact for policyholders looking for insurance quotes. They can now provide more valuable advice to clients, becoming trusted advisors in the process. (3) Carriers and underwriters provide the actual insurance coverage. AI enables them to make better-informed decisions about which clients to insure, reducing their overall risk exposure. By using machine learning and automation, all three parties can benefit from improved processes and more accurate risk assessments.
Summary
AI enables insurance companies to deliver improved risk assessments, moving from a traditional questionnaire approach to a more comprehensive evaluation of a client's security posture. By utilizing AI and automation, all stakeholders in the cyber risk insurance and assessment life cycle can benefit.
Which other industries’ use of AI would you like to learn more about?
» Watch the latest episodes of “What’s the BUZZ?” on YouTube or listen to it wherever you get your podcasts. «
What’s next?
Appearances
April 10 (postponed) - Together with Joe Reis & Matt Housley, we’ll talk about defining a company’s AI strategy and how data professionals can better collaborate with their business stakeholders. Check out Monday Morning Data Chat.
Join us for the upcoming episodes of “What’s the BUZZ?”:
April 11 - Maya Mikhailov, Founder & AI Leader, will join the show to share how as an AI leader, you can Set Expectations With Your Leaders.
April 25 - Ramsay Brown, Founder & CEO Mission Control, will be on the show when we talk about How Businesses Can Trust Generative AI in times of rapid innovation.
May 9 - Brian Evergreen, Founder & CEO The Profitable Good Company & Author, will discuss how manufacturing businesses can Create A Human Future With AI.
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Together, let’s turn hype into outcome. 👍🏻
—Andreas