What Does Market-Leading Cyber Claims Management Look Like?

In today’s rapidly evolving digital landscape, the importance of robust cyber claims management cannot be overstated. As cyber threats grow in complexity and frequency, so does the need for insurers to provide comprehensive coverage and expert handling of claims. With the cyber insurance market projected to double to $29 billion by 2027, the race is on to set the standard in cyber claims management. But what does it take to be a market leader in this critical area?

In this blog, we’ll explore the intricate nature of cyber claims, the specialized skills required by claims adjusters, and the strategic measures insurers must adopt to excel in managing cyber claims.

The Complexity of Cyber Claims

Cyber insurance is a unique product, offering coverage for a broader range of risks than most other insurance types. The nature of cyber threats means that the scope of potential losses is vast, covering everything from tangible and intangible assets to reputational damage and legal liabilities.

First-Party Coverages

First-party coverages in cyber insurance are extensive. They include damage to physical and digital assets, such as devices, networks, and intellectual property. These coverages also address financial losses resulting from business interruptions, lost opportunities, and even reputational damage. Moreover, the costs associated with responding to a cyber incident—such as recovery, restoration, and remediation—are also covered. This can include expenses for investigations, notifying affected parties, and dealing with intellectual property theft, such as patents and trademarks.

Third-Party Coverages

On the other side, third-party coverages address the liabilities that a business might face due to a cyber incident. This includes contractual obligations, legal liabilities, and regulatory proceedings. It also covers civil damages, payment card losses, errors and omissions, and technology professional liability. These coverages ensure that a company is protected not only from the immediate effects of a cyber incident but also from the long-term legal and financial repercussions.

Handling a claim for a comprehensive cyber insurance product, especially for a large multinational corporation, is a highly complex task. Cyber incidents, much like oil spills, are catastrophic by nature, do not respect geographical boundaries, and are continually evolving. A single cyber breach can have a far-reaching impact, affecting not just businesses but entire societies and critical national infrastructure, including hospitals, water systems, and airports.

The complexity of cyber claims doesn’t stop there. The technical nature of these claims presents unique challenges for today’s claims adjusters. They must navigate the intricacies of IT systems, cybersecurity protocols, digital forensics, and a constantly changing regulatory landscape. This includes understanding data protection laws, AI protection, and privacy legislation across various jurisdictions. Furthermore, claims adjusters must manage a diverse team of specialists, including IT forensic experts, data analysts, forensic accountants, legal counsel, public relations experts, and crisis management professionals.

The Skills of a Cyber Claims Adjuster

Given the complexity of cyber claims, the skills required of a cyber claims adjuster are both broad and deep. These professionals must possess a comprehensive understanding of the various elements involved in cyber claims and have the ability to manage a wide range of experts effectively.

Knowledge Requirements

A cyber claims adjuster must have advanced, industry-recognized qualifications and a background in areas such as Errors & Omissions (E&O), Trade Credit, Political Risk, or Crisis Management. They need practical knowledge of first and third-party cyber coverages, including reserving, evaluations, and risk management processes. This knowledge is typically gained through previous experience in cyber claims or broker advocacy roles.

Experience Requirements

One of the industry’s significant challenges is the limited talent pool of qualified cyber claims adjusters. It is crucial for adjusters to have a deep understanding of the roles and responsibilities of the various experts involved in cyber claims. Their practical experience is essential for effectively overseeing and managing these experts to ensure a rapid response to claims, mitigate further losses, and achieve a complete resolution.

Cyber claims have become increasingly complex, yet many adjusters come from related but not directly relevant lines of business. A critical skill that is often missing is proficiency in IT systems, cybersecurity protocols, digital forensics, and a thorough understanding of evolving regulations across IT, AI, GDPR, and consumer privacy. This expertise is particularly vital when dealing with technology-based companies, where coverage is often bespoke and highly specialized.

Operational Responsibilities

Cyber claims adjusters must be able to determine the existence, cause, and scope of a breach and manage all key activities in cyber claims management. This includes selecting and managing the appropriate incident response team, assessing the impact on the customer’s business, and ensuring compliance with data protection and privacy regulations. Adjusters must also be able to identify and respond to fraud triggers and provide feedback to underwriting risk controls and actuarial tables.

Customer Segment Knowledge

An in-depth knowledge of various customer segments, from SMEs to large multinational corporations, is also essential. Cyber insurance is a rapidly evolving product and remains relatively niche compared to other lines of business. This presents insurers with the challenge of whether to organize their cyber claims team as a line of business center of excellence (CoE) or to integrate them into existing CoEs focused on specific customer segments like SMEs or multinationals.

Emerging Risks and Challenges

The task of managing cyber claims is becoming increasingly complex due to the extensive coverage of cyber insurance, the rapid pace of technological advancement, and the systemic risks associated with cyber incidents. One of the most significant emerging challenges is the impact of Generative AI (Gen AI). While Gen AI offers new capabilities for both cyber attackers and defenders, it also introduces new risks and makes cyber incidents more sophisticated and frequent.

Strategic Choices for Market Leadership in Cyber Claims

To achieve market-leading status in cyber claims management, insurers must focus on four key components:

1. Advanced Claims Applications: Insurers need claims management applications that are specifically designed for cyber claims. These applications must support adjusters in managing incident response teams and specialists effectively. They should also provide comprehensive master data management to handle the multitude of relevant cyber claims data points and ensure secure, expert-specific access to documents.
2. Continuous Development Programs: Insurers must implement continuous development programs to keep adjusters up-to-date with evolving cyber risks, technological changes, and the opportunities and challenges posed by Gen AI. This ongoing education is crucial for maintaining expertise in the rapidly changing landscape of cyber insurance.
3. Cyber Saferooms: A cyber saferoom provides a secure environment for pre-incident advice, training, incident response planning, and notification services. These saferooms must be equipped with the right guardrails to facilitate collaboration with independent legal breach counsel and ensure that all activities are conducted within a secure and compliant framework.
4. Data-Driven Feedback Loops: Insurers need a continuous feedback loop of claims master data that informs actuarial tables and underwriting risk controls. Leading insurers achieve this by developing scalable infrastructure and architecture that allows for real-time updates to technical pricing based on loss history and other variables.

Bottom Line

As the cyber insurance market continues to grow, the demands on claims management will only increase. Market-leading insurers are those who can navigate the complexities of cyber claims, equip their adjusters with the right skills and tools, and implement strategic measures that ensure they remain at the forefront of this critical field. By focusing on advanced claims applications, continuous development, secure cyber saferooms, and data-driven feedback loops, insurers can achieve excellence in cyber claims management and set the standard for the industry.