Insurance companies, like other financial institutions, face a range of unique cybersecurity challenges and considerations. Responsible for safeguarding treasure troves of sensitive data, the industry has long been a prime target for cybercrime — a trend that has endured even as today’s IT landscape, and the threats against it, continue to evolve.
In the past year alone, insurance companies like Sun Life, American Family, Lloyd’s of London, Prudential Malaysia, and Philippine National Health have all been hit with ransomware, phishing, and other types of cybercrime. And the research seems to only reinforce what we’re seeing in the headlines. According to Cybereason, the financial services industry, which includes insurance companies, is besieged by ransomware, and phishing attempts, ranking among the top three sectors most likely to be attacked. Last year, the financial industry was the second-hardest hit sector overall in terms of cost per breach, according to the IBM Cost of a Data Breach Report 2023.
In an increasingly connected world, where data is the new currency and technology is at the forefront of every business operation, cybersecurity has become an overriding concern for all types of insurance companies and providers. The reasons behind this concern are multi-faceted and deeply rooted in the unique position that this industry holds within the global economy. Let’s explore why the insurance industry should be deeply concerned about cybersecurity.
“The insurance industry’s sheer size and scope, along with the substantial amount of sensitive data it manages and stores, make the sector a prime target for all types of cybercrime.” – Mark Rosanes
Protection of Sensitive Data: Insurance companies deal with vast amounts of sensitive and confidential data, including personal information, financial records, and medical histories. Protecting this data is not just a matter of trust but also a legal obligation. Cyberattacks can lead to data breaches, causing significant financial and reputational damage, as well as legal repercussions. In a recent article, Mark Rosanes, from Insurance Business Magazine, wrote: “The insurance industry’s sheer size and scope, along with the substantial amount of sensitive data it manages and stores, make the sector a prime target for all types of cybercrime.”
Financial Consequences: Cyberattacks can have severe financial consequences for all organizations, especially insurance companies. The cost of investigating, mitigating, and recovering from a cyber incident can be astronomical. Additionally, insurance companies may be held liable for the losses incurred by their policyholders due to cybercrimes. In IBM’s annual report on data breaches, the financial industry lost approximately $5.9 million per breach in 2022 — this is per incident! — which came in at 28 percent higher than the global average.
Trust and Reputation: Trust is the foundation of the insurance industry. Customers entrust insurance providers with their most personal and valuable information. A data breach or cyber incident can erode trust and damage an insurance company’s reputation, potentially leading to the loss of customers and revenue.
Regulatory Compliance: The insurance sector is heavily regulated. Numerous laws and regulations govern the handling of customer data, and non-compliance can lead to severe penalties. Ensuring cybersecurity measures are in place is not just a best practice but a necessity to adhere to these legal requirements.
Evolving Threat Landscape: The threat landscape is constantly evolving. Cybercriminals are becoming more sophisticated, employing new tactics and technologies. Insurance companies must adapt their cybersecurity strategies to stay one step ahead of these threats.
Third-Party Risks: Insurance providers often collaborate with a network of third-party partners. These connections create additional vulnerabilities, as they may not have the same level of cybersecurity practices in place. An attack on a third party can impact the insurance company and its customers.
Policyholder Vulnerabilities: Insurance policyholders themselves can be vulnerable to cyber threats. Cyber insurance is a growing market, and policyholders may file claims related to various types of cybercrimes. To offer effective coverage and assess risk accurately, insurance companies must understand all facets of cybersecurity.
Operational Disruption: All types of cybercrimes and attacks can disrupt an insurance company’s operations, affecting its ability to serve customers, process claims, and conduct business efficiently. This can lead to financial losses and customer dissatisfaction.
Long-Term Viability: Cybersecurity is not a short-term concern but a fundamental component of an insurance company’s long-term viability. Those who invest in robust cybersecurity measures are better positioned to survive and thrive in a digital age.
Competitive Advantage: The primary challenge confronting the insurance industry is cybercrime, which includes the risk of sensitive data theft, phishing, and ransomware attacks. Notably, cybercrime has maintained its position as the most prominent global risk in this industry since 2020. In a crowded market, a strong cybersecurity posture can be a significant competitive advantage. Customers are becoming increasingly aware of the importance of cybersecurity, and they often choose insurance providers that can demonstrate their commitment to protecting data and privacy.
Social Responsibility: Insurance companies are seen as corporate citizens. Contributing to a safer digital environment by actively pursuing cybersecurity measures is a form of corporate social responsibility. It demonstrates a commitment to protecting not only the bottom line but also society at large.
Wrapping up, cybersecurity is not a choice but an imperative for the insurance industry. The consequences of failing to address cybersecurity adequately can be devastating, affecting finances, reputation, customer trust, and even legal standing. Insurance companies can enhance their operational security and demonstrate a strong commitment to customer and societal well-being by acknowledging the significance of cybersecurity and implementing robust protective measures.
In today’s digital environment, cybersecurity is a crucial investment for the long-term sustainability and success of the insurance sector. Managed Security firms like 11:11 Systems can assist organizations at any stage of their cyber resilience journey. For more information, check out the additional 11:11 Systems resources.
Additional 11:11 Systems Resources:
White Paper: “Safeguarding your business in the digital age”
Data Sheet: 11:11 Managed Security Services
