Cyber Risk and the Threat of the Unknown

October 4, 2016 by Jessica McGregor and Vincent Cahalan

As new technology is developed and digital applications are rapidly becoming more prevalent, cybersecurity continues to be an evolving risk and a potential loss area for insurance companies. The impact of a cyber incident can vary widely, and previously undiscovered risks can result, making underwriting cyber risk challenging for insurers.

The uncertainty around cybersecurity also poses issues for insureds—from fully understanding what to insure to how much coverage is actually needed. The boundaries of cyber risk policies can be difficult to define, as consequences of breaches and new threats continually create new scenarios for businesses as well as consumers. As businesses continue to embrace digital distribution channels, develop online products (e.g., smart home appliances and smart medical devices) and digitally maintain more personally identifiable consumer data, the inherent risk to cybersecurity becomes even greater and impacts both personal and commercial lines customers.