Xchanging plc today revealed that only one-third of insurers in the London Market believes their firm could withstand a major cyber-attack, and almost half felt they were underprepared, according to a survey conducted by the company.
As holders of vast amounts of client data, insurers, like many other businesses, are vulnerable to attack by cyber criminals, and reports of data breaches – such as the hacking of broadband provider TalkTalk last month – are becoming increasingly regular occurrences.
Figures quoted by the UK government in September revealed that 74% of small businesses, and 90% of major businesses, had a cyber breach of security in the previous year.
While 36% of respondents to the survey – conducted at the Xchanging London Market Conference 2015 this month – said they ‘definitely’ have sufficient measures in place to withstand a major cyber-attack, 30% felt they are only partially protected, 16% said they are insufficiently protected, and 18% were unsure.
Adrian Guttridge, Executive Director of Xchanging Global Insurance Services, said: “The insurance industry is grappling with the extensive threat of cyber-attacks from an underwriting and risk management perspective and, in the absence of enough meaningful data, modelling the risks involved remains a grave challenge. As custodians of vast amounts of data, insurers are also aware that they, too, are vulnerable to cyber breaches – and the reputational damage that this can cause.”
Guttridge added: “The recent cyber-attack on TalkTalk is the latest in a lengthy list of high-profile hacks of personal data held by government and commercial organisations.
“Insurance companies must take very seriously the extent of the risks they face and ensure their cyber security measures are constantly reviewed and updated. They should also be mindful that, in some areas, a collaborative, industry approach in which knowledge and skills are shared among peers, may be the most effective way to strengthen cyber defences.”
Since becoming authorised by the UK’s National Cyber Security Programme’s Cyber Essentials scheme in February 2015, Xchanging has been sharing technological expertise with other companies to help them understand their exposure to common cyber threats. Xchanging's Cyber Security Assessment uses the programme’s 10 Steps to Cyber Security Guidance process to work in collaboration with customers to understand their cyber security structure, align it to their business requirements and to quantify possible vulnerabilities. The results enable firms to identify key areas of improvement and actions that may be taken to bolster security and reduce cyber risks.
The digital survey gathered the views of 70 delegates on the risks and challenges facing the Lloyd’s and London Markets, including their perception of London’s future position as a global insurance centre.
When asked to rank in order of importance the factors making London less competitive than other global insurance hubs:
- Cost came out as number one (30%)
- Lack of modernisation (27%), and increasing regulation (27%), took joint second place
- Competing expertise in overseas hubs (16%) was seen as having the least impact.
With Embracing Global Change as the conference’s overarching theme, the emphasis was on London’s need to modernise and offer the right products, services and processes. As rival markets start to emerge, Singapore was chosen from a list of five as the insurance hub likely to expand the most in the next five years.
And with Solvency II going live in less than two months, 86% of respondents said they are confident that their organisation is fully compliant with upcoming regulation.
Guttridge commented: “The skills and entrepreneurship within the London Market have secured its ongoing position at the forefront of the global insurance industry but its pre-eminence is undoubtedly under threat from various existing and emerging markets. It is reassuring therefore, to see the huge commitment within the market for a continued programme of modernisation, including the timely implementation of the Target Operating Model (TOM), which aims to put London on an equal footing with younger markets such as Singapore when it comes to efficiency and straight-through trading.”
With the recent wave of mergers and acquisitions (M&A) in the insurance industry, according to the poll, more than one-third (37%) of the market believes that massive job losses will be the single biggest impact of M&A activity among insurance companies. This was followed by cost efficiency (31%), loss of well-known names (26%) and stable prices (6%).