Insurers fear rise in sensitive data theft as cyber crime tops list of the sectors key concerns

The potential theft of sensitive data, as well as phishing and ransomware attacks pose the greatest global threat to the insurance sector according to new research from PwC and CSFI, the financial services think tank. The findings track the opinions of insurance leaders around the world about what they see as the most significant risks facing the sector over the next two to three years. 

The so-called "banana skins" include challenges for the industry such as changing regulation, climate change and talent/recruitment; however, the risk posed to insurers’ operations by cyber crime remains the greatest threat. It also topped the rankings in 2021 - when the research was last carried out. 

The Insurance Banana Skins 2023 report, run biennially, is based on responses from insurers in 39 territories and over three-quarters of the respondents were from the primary insurance industry ie: the life and non-life sectors. The remainder were from the reinsurance and broking sectors. Responses also came from non-practitioners such as regulators, consultants, analysts, and other professional service providers. Half the respondents came from Europe, and almost a third from the Asia Pacific region. The remainder were almost all from North America and Africa.

PwC Insurance Partner Andy Moore, said:

“For large-scale insurers, the prospect of a serious cyber attack is daunting, especially as organisations rightly look to new digital solutions to promote efficiencies, improve customer engagement and shore up the critical bottom line.

“The challenge for insurers is that as their businesses become more complex - with new hardware, cloud computing and third-party services in longer supply chains - cyber vulnerabilities unfortunately increase. 

“Criminals are becoming more adept at monetising their breaches, and with the prospect of  sensitive customer data leaks, it seems that for the insurance sector the ability to be resilient to cyber-attacks is a core requirement, with cyber security being less a 'bolt on' and rather something to be designed into the business and IT architecture.”

There were also fears that artificial intelligence can be used as a powerful new weapon to breach insurers’ security. Several research respondents focused on the state-sponsored dimension of cyber crime, which is perhaps exacerbated by the current political climate with companies, nations and other entities under increasing cyber attacks, and where assigning clear blame for such actions becomes ever more difficult.

On top of the potential damage caused by cyber crime, a concern was of the potential mounting costs that could occur to assist with mitigating potential bad actors. Investing in defence could become more challenging as the IT ecosystem around the insurance industry expands, due to the growth of internet connected  devices and increased reliance on cloud and third-party services.  

The report also found that the fastest-growing risk was climate change which moved into the top three for the first time. It is clear that the impact of climate change is a much nearer-term risk than previously perceived and in many cases, the effects are already being felt. The worldwide focus on climate change as part of the wider ESG agenda is resulting in a step-change for most insurers. Reporting requirements are increasing, and governments and regulators continue to press companies to better articulate and explain how they are quantifying and managing the related risks. 

Martina Garcia, CSFI Director, said:

“The Banana Skins survey shows that, while the industry is understandably feeling more apprehensive about external risks such as climate change or the macroeconomic outlook, it is also increasingly concerned about internal management risks. Further strengthening governance might be the key to enable the industry to address efficiently the deterioration in the external risk environment."

Sector specific overview

For life insurers,  regulation keeps its position as the top risk facing the life insurance sector, followed by cyber crime.  The business environment also features strongly with a focus on interest rate risk, the macro-economy and investment performance.  The sector shared the industry’s overall concern with the impact of technological change, though the risk from AI ranked lower than in the overall table. There was also a lesser concern with climate change risk compared to the non-life and reinsurance views.  

For those in non-life, climate change remained the dominant concern for the property and casualty side of the industry, followed by the operational risks brought on by the rise in cyber crime.   Technology and artificial intelligence were also high level concerns, along with regulation.   The challenges of managing change were ranked higher in this sector than on the life side, though macroeconomic risk was ranked lower.   In common with the rest of the industry, this sector is feeling the pressure of human resource shortages.

Following the hottest month globally since records began, in July 2023, it is unsurprising to see Climate Change continue to rise in the list of risks for the reinsurance sector. It also shared high level concerns about crime, technology and generative artificial intelligence with other sectors.  Recruitment was also a common problem.   Reinsurers were the only sector to place de-globalisation in the top ten, reflecting, possibly, the global nature of this segment of the insurance business, and its concern about protectionism.

ENDS

Notes to editors

Insurance Banana Skins 2023 surveys the risks facing the insurance industry in mid-2023, and identifies those that appear most urgent to insurance practitioners and close observers of the insurance scene around the world. 

The report, which updates previous surveys in 2007, 2009, 2011, 2013, 2015, 2017, 2019, and 2021, was conducted from May-August 2023, and is based on 589 responses from 39 territories. 

The questionnaire was in three parts. In the first, respondents were asked to describe, in their own words, their main concerns about the insurance sector over the next 2-3 years. In the second, they were asked to rate a list of potential “Banana Skins” or risks. In the third, they were asked to rate the preparedness of insurance institutions to handle the risks they saw. This report ranks and analyses each Banana Skin individually.

For more information and to download the report visit the CSFI website.

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