Artificial Intelligence or AI tools have taken the world by storm, driving greater efficiency in various industries, and cyber insurance companies should be no exception. AI tools can change the cyber insurance industry by increasing the accuracy of data collection, underwriting, risk assessment, and premiums. This article will explore just some of the many ways in which AI will revolutionize the insurance industry.
Without AI, Cyber Underwriting Will Remain In The Dark Ages
In recent years, the rise in demand for cyber insurance has left cyber insurance companies with an inability to properly protect all their clients. They struggle to uphold the demand with traditional insurance methods, creating a huge hole in the market.
This is exacerbated by the fast pace of change and unpredictability in the cyber threat landscape. This has, in turn, prompted a decrease in carrier risk appetites. In response, carriers have increased premiums and reduced coverage. However, the diversity of loss ratios indicates that, despite these measures, the market is still highly volatile.
Cyber insurance companies must begin to implement AI tools to achieve higher levels of predictability and meet the growing demand for policies.
AI Tools Can Drive Better Actuarial Data
Traditional cyber underwriting methods are inadequate causing insurers to focus more on a company’s security tools rather than the efficacy of their employees, processes, and technology. Insurers cannot properly know how prepared a company is to withstand a cyber attack without having access to this information and underwriting, as a manual process, has created a situation where companies are at risk for overexposure. The implementation of AI tools will help mitigate the risk of overexposure by creating a predictive model based on internally sourced data, third-party data, and public domain databases. This will help the cyber insurance industry better record, organize, and aggregate data resulting in more informed decision-making.
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AI Tools Can Enable Cyber Underwriting At Scale
Currently, the manual processing involved in cyber underwriting results in significant delays when trying to assess cyber risk and this is hindering scaling for many cyber insurance companies. This process inherently leads to exposure and inadvertent coverage. Therefore, the implementation of AI tools will allow cyber insurers to easily screen applications and extract the relevant information streamlining the cyber underwriting process. By training AI to standardize coverages, cyber underwriters can work more efficiently and ensure the elimination of coverage overlap, improving the quality of cyber underwriting.
How AI Can Change Cyber Insurance Premiums
Cyber insurance companies are relatively new and one of the bigger facets of the industry that lacks standardization is pricing models. Cyber insurance premiums begin at a base rate and then the price goes up based on revenue range, industry risk category, security weightage score, and more. Furthermore, The cyber insurance industry does not have sufficient monetary reserves set aside for future claims and this only further promotes the need for lower premiums. Using AI tools can help greatly improve the pricing of cyber insurance premiums by considering factors like threat exposure, network structure, and endpoints. Additionally, AI tools increase cyber risk protection by offering an in-depth analysis of the company’s defense and cyber risk scores.
In summary, the world has already begun to implement AI tools in so many facets of everyday life and cyber insurance companies should do the same. There is no doubt that with every new development, a slew of risks emerge that must be mitigated. However, pushing an archaic insurance industry forward through AI tools will offer companies and individuals the cyber safety and security they are looking for. This article has dealt with a very small fraction of the myriad of applications of AI to insurance underwriting. We will be continuing to cover this emerging technology and it’s impact on other areas of insurance, claims, customer service and more.
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