Recent Data Breaches Emphasize the Need for Insurtech Implementation

With the Covid-19 pandemic beginning in 2020, many companies were forced to transition their business model from in-person to virtual in order to survive for the next few years. This change across industries resulted in an increase in cyber attacks for 81% of global organizations. A cyber attack is “any kind of malicious activity that attempts to collect, disrupt, deny, degrade, or destroy information system resources or the information itself”.

These cyber-attacks could vary from a ransomware attack, which downloads malicious software to encrypt data from the owner and forces the victim to pay a fee to the attacker, to a spyware attack, which steals data unknowingly and sells it to interested buyers.

Just last month, the personal data of over two million Japanese policyholders for both Zurich Insurance, a global insurance company headquartered in Zürich, and Aflac life insurance, the

largest provider of supplemental insurance in the U.S., was leaked online in a third-party data

breach. Aflac issued a statement confirming that the hackers accessed 3.2 million records and leaked the information of 1.3 million users. Similarly, Zurich announced that 757,346 current and former policyholders had their personal, vehicle, and product information leaked. It stated that there was no indication that non-Japanese customer data was affected and that the attack did not appear to be systemic.

Neither company has publicized the name of the data leak site nor the third-party vendor

involved in the breaches, so it remains unclear whether the incidents are related in nature.

However, speculation has pointed to a coordinated attack as both hacks were of a similar nature and exclusively targeted Japanese residents. Data breaches have risen sharply over the last 15 years, putting citizens across the globe at risk.

Aflac reported that the data breach originated from a file transfer vulnerability within a third-party server used for marketing. They have since activated the designated response plan and are working with cyber experts to investigate the event. The subcontractor has since deleted data from the vulnerable server to protect customer data against further attacks. Zurich’s breach did not compromise any internal systems and did not affect customers’ bank account information. Ironically, the hacks occurred just a few days after the Zurich Insurance Group chief publicly stated that the increasing frequency of cyber-attacks might make them uninsurable. Recent hacks have shut down pipelines, interrupted hotel operations, and attacked various government departments, putting cyberattacks on sensitive data at the forefront of insurers' minds. The enormous growth in cyber losses over the past few years has pushed underwriters to limit exposure, hike prices, and adjust policies so that businesses bear increased responsibility for losses.

With the rise in demand for cyber insurance, it is becoming more difficult for companies to afford insurance due to the increase in premiums and stricter “underwriting requirements, including making cyber security protocols such as multi-factor authentication mandatory” and a decrease in complimentary insurance packages. These increasing costs have prompted companies to look for more cost-effective solutions. InsurTech is creating an innovative approach to combat this problem. Traditionally, insurance groups rank clients into tiers based on risk and exposure, and therefore, it is quite common for customers to pay slightly more for less. Now with the help of InsurTech, insurance companies can offer more tailored packages to their clients by working with more in-depth customer data and artificial intelligence programs resulting in a more fair pricing system. Much of this data is derived from a stricter and more detailed assessment of companies. Through the use of AI, insurance companies can accurately assess the different risks of their clients, thus helping combat the surge in cyber attacks by saving both parties time and money. When it comes to comparing InsurTech to Traditional Insurance, there are a few key pros and cons to consider.

A few of these advantages include receiving real-time data on your business, having more automated processes, and reducing operating costs. On the other hand, there is the risk of data privacy which InsurTech companies have to account for. With this in mind, InsurTech might be an upcoming industry, however, it has the ability to drive change and provide advanced technological solutions.

Authors: Manya Kodali, Ashika Kanchanakuntla