When more than 100 insurance industry executives were asked what they consider to be the most dangerous insurance risks, we discovered that every single of them mentioned these three things; pricing/profit, cybercrime and disruptive technology.
Forward-thinking businesses are using insurance to mitigate the impact of cybercrime in their business.
In this article, we shall be discussing how these challenges are posing dangerous risks in the insurance industry, especially in developing countries.
Cybersecurity and cybercrime
On 15th July, 2020 history was made when there was a widespread cyberattack on the Twitter accounts of every high-profile individual and organizations you know with a large following.
It was a Bitcoin scam. As a result, people were defrauded millions of dollars. These hackers had used the accounts of the likes of Joe Biden, Barack Obama, Apple, Jeff Bezos, Bill Gates, etc to promote a money-doubling venture.
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The insurance industry is not 100% safe. Cybersecurity and cybercrime are dangerous risks insurance companies are facing in 2020 and will likely face in the future. Insurance companies have more to worry about cybercrime than anything you can think of.
Aside from the direct cyberattacks insurance companies face, they also have to deal with paying policyholders for the losses they incur.
Cyber-criminals target the insurance companies a lot because they know that they have a large amount of personal information about their target audience, the victims. It doesn’t matter whether you are a customer of the insurance company or you just visited once to get an insurance quote.
If hackers succeed in having access to the backend of the insurer, chances are, they will steal the credit card details of customers and use it for malicious purposes. Social engineering is a big challenge right now in the insurance sector.
General insurance coverage is what gives a policyholder the opportunity to access full benefits should they be a cybercrime attack leading to loss of funds or expensive equipment, including reputation.
Digital disruption in the insurance industry is something that has been anticipated for a long time before it finally came. Although it hasn’t really been adopted in some developing countries.
In developed countries, for instance, it’s super easy for anyone to get their car or life insurance quote online without phone calls, just by merely using the insurance quote calculator on the insurer’s website.
Unfortunately, in developing countries, you will have to visit an insurance broker or the agent of an insurance company for you to even get a quote. Sometimes, they charge a consultation fee.
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The emergence of insurtech startups, the widespread artificial intelligence and the unimaginable growth of digital transformation of business models are some of the most outstanding disruptions that are going on in the insurance industry.
For an insurance company not to become obsolete, lose their customers to their competitors and possibly struggle, they need to decide which of these innovations they will need to adopt based on who their audiences are, what they want their unique selling proposition is and how empowered they are to handle such growth.
This might sound simple but it’s obviously one of the most difficult decisions insurers are struggling with right now. They have absolutely no idea which of the insurance industry digital innovations to adopt and which one to ignore.
Of course, the adoption of artificial intelligence in the insurance industry comes with its own risk that insurers must start thinking of proactive ways to manage.
Pricing and profit margin
Inflation, exchange rate, government and industry regulations, and policies, and interest rate are some of the few factors that affect insurance pricing and profit margin.
There’s a way you will price your policies and nobody will get their cover from you and there’s a way you will adjust it and you won’t be profitable.
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It’s a big challenge for insurers to determine these things in an ever-evolving society like ours.
To ensure that insurers don’t rip you off as their policyholder, they will use your credit score and history to determine your premium on insurance. If for any reason you don’t qualify you will be notified.
Everyday regulations continue to put pressure on profitability and this is a dangerous risk in the insurance sector. A typical example is Solvency II which requires insurance companies to maintain higher capital levels without decreasing overall returns. And for them to achieve this they must either reduce costs or increase pricing.
Cybersecurity, pricing and disruptive technology are the three biggest, pressing and most dangerous risks facing the insurance industry. It doesn’t matter whether you are operating from the United States, the UK, Australia or Canada, these insurance industry challenges are the same.