Nov 20, 2020

Allianz: Internal corporate failures drive cyber claims

Allianz
Munich Re
Cyber risk
Cyber insurance
William Girling
2 min
Allianz has released a new report examining current trends in enterprise cyber risk and the overall effect of increased interconnectivity
Allianz has released a new report examining current trends in enterprise cyber risk and the overall effect of increased interconnectivity...

Allianz has released a new report examining current trends in enterprise cyber risk and the overall effect of increased interconnectivity.

As part of its research, the company analysed 1,736 cyber insurance claims at a total value of US$770m. Prominent among its findings were the following:

  • The most expensive losses come from external cyber attacks. However, the vast majority of annual infractions originate from internal failures.
  • From 2015 to 2020 the average cost of cyber crime has increased 72% to $13m.
  • Over the same period, there has been a 67% rise in the number of cases. 

The growing ubiquity of digital technology within modern business would explain this ascending trajectory of cyber crime. 

Allianz has tracked the incremental increase in cyber risk and its implications on insurance: In 2016, 77 claims were made; in 2019, this figure grew over 1,000% to 809; and in 2020, the company states that it has already received 770 claims between Q1 and Q3.

The pandemic’s effect of moving workforces to remote working could also amplify this risk in the short-term. Ensuring companies are secure from the inside should be given high priority, Allianz argues. 

“Losses from incidents such as distributed denial of service (DDoS) attacks or phishing and ransomware campaigns account for a significant majority of the value of cyber claims today,” says Catharina Richter, Global Head of the Allianz Cyber Center of Competence. 

“But although cyber crime generates the headlines, everyday systems failures, IT outages and human error incidents can also cause problems for companies, even if their financial impact is not, on average, as severe. Employers and employees must work together to raise awareness and increase cyber resilience.”

Combined with Munich Re’s valuation of the contemporary cyber risk market at $7bn, it is highly likely that this strand of insurance will become exponentially more valuable in the coming years.

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May 28, 2021

FCA bans ‘price walking’ for insurers from Jan 2022

FCA
pricewalking
insurers
Insurtech
3 min
The City regulator has said insurers must not raise prices at renewal and penalise loyal customers

Insurers will no longer be allowed to raise premiums upon annual customer renewals following a new ruling by the Financial Conduct Authority (FCA)

The new move, which comes into effect in January 2022, will directly affect people renewing their home or motor insurance because they will pay no more for their premiums than a new customer. 

The FCA said the change will save loyal customers an estimated £4.2bn over a 10-year-period. However, it also admitted the move could mean cheaper deals for new customers can no longer be sustainable for insurers attempting to attract business. 

Price walking practices ended

According to reports, the FCA has been working on changing the rules on ‘price walking’ as it is termed, because customers are charged more their annual premiums, even though their level of risk remains the same. The system has resulted in complaints from consumer groups that loyal customers pay more unnecessarily.

Speaking about the regulatory change, Sheldon Mills, from the FCA told the BBC

"These measures will put an end to the very high prices paid by many loyal customers. Consumers can still benefit from shopping around or negotiating with their current provider, but won't be charged more at renewal just for being an existing customer."

Victory for the customer

Consumer groups have hailed the change as a victory for customers who have ended up paying higher premiums unnecessarily, but admitted it presented huge implications for insurers in the short term.

Consumer Intelligence CEO, Ian Hughes said, “These changes represent a tsunami for both insurers and their customers, but we should be in no doubt that the fault line that sits underneath this is fair value, mentioned 153 times in the final statement. GIPP changes will feel like just a ripple for those who don’t offer fair value to customers."

He continued, “This is going to be a bumpy ride for insurance brands and consumers alike in the short term. Today, the FCA has revealed that cash and cash-equivalent incentives, other than toys and carbon off setting, cannot be used to entice new customers without being offered to renewing customers. This means the savviest consumers who shop around each year will see prices rise and discounts and offers disappear.

“However, there is an opportunity for the industry to take advantage of all this change that is coming and do something that will be good for brands, good for the industry and good for consumers."

Consumer Intelligence PR and communications manager, Catherine Carey agreed, and described the victory as “a shot in the arm for innovation.”

Carey said the move “presses a giant reset button on the relationship between price and value, it will change the relationship between brands and consumers.”

She explained, “We expect to see insurers changing their models and new firms entering the market for the first time as loss-making year one pricing phases out. If you look at these new rules, and specifically the introduction of fair value, it’s the most exciting time for the development of the general insurance market for decades.”

Hughes also warned against insurers resisting the regulatory change, “Those that don’t take advantage of the opportunity are going to find it really tough.”

He added, “The tipping point we find ourselves at today is a critical point in the journey of this industry and there is an opportunity to be positive.”

 

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