Security

The Internet of Things is revolutionizing almost every aspect of modern life, from smart homes and wearable devices to connected cars and industrial automation. And the insurance sector is no exception.

The number of IoT devices worldwide is projected to nearly double from 15.9 billion in 2023 to over 32.1 billion by 2030. But how are the 5,900 US insurance companies using these IoT devices to stay competitive in this data-driven era? Let’s get into it.

Why IoT devices are powerful tools for risk assessment

IoT devices are becoming increasingly powerful tools for risk assessment in the insurance industry. By generating vast amounts of real-time data, these devices provide insurers with a more comprehensive understanding of policyholders’ behaviors and environments. This data can be used to:

• Identify and mitigate potential risks: IoT devices can detect early signs of hazards, such as water leaks, fire, or security breaches. By alerting insurers to these risks, proactive measures can be taken to prevent losses.
• Improve pricing accuracy: IoT data can help insurers develop more accurate pricing models. For example, telematics devices in cars can track driving habits, allowing insurers to offer personalized rates based on driving behavior.
• Enhance customer satisfaction: IoT-enabled devices can provide customers with personalized services and support. For instance, smart home devices can monitor energy consumption and provide recommendations for reducing costs.
• Facilitate fraud detection: IoT data can help identify fraudulent claims by providing evidence of policyholder behavior or environmental conditions.

A deeper look – automotive sector use case

The potential for IoT devices to revolutionize risk assessments in the automotive insurance industry is immense. As IoT technology advances, cars are becoming increasingly equipped with powerful IoT sensors and connectivity. This trend is expected to accelerate, with newer car models featuring even more sophisticated IoT capabilities.

Telematics devices, for example, can track a driver’s speed, acceleration, braking, and even their location. This data can be used to identify risky driving habits and reward safe drivers with lower premiums. For example, let’s say a driver consistently speeds or brakes harshly. Insurers can then use this data to analyze patterns. Do drivers who behave like this tend to have more accidents? Are they more likely to get tickets? Logic would tell us, yes, but IoT removes the guesswork and gives us a definitive answer. By identifying these correlations, insurers can more accurately assess risk and adjust premiums accordingly – in this case, higher premiums.

And of course, the opposite is also true. A driver who maintains a steady speed, avoids sudden braking, and follows traffic laws may qualify for a discount on their insurance premium.

Here’s the bottom line. Vehicles are complex machines, and humans are even more so. But when it comes to monitoring, there’s no shortage of possibilities. IoT sensors can analyze almost every aspect of vehicle health and driver behavior, providing data that can inform highly accurate risk assessments. This, in turn, helps insurance companies make more precise forecasts and offer more personalized premiums.

Here are some examples of IoT data we can leverage in the automotive sector:

• Predictive maintenance: IoT sensors can monitor vehicle health in real time. By identifying potential issues like engine problems, tire pressure imbalances, or brake wear before they lead to breakdowns or accidents, insurers can offer discounts to drivers with well-maintained vehicles.
• Tire Pressure Monitoring Systems (TPMS): TPMS will become even more sophisticated, providing more accurate tire pressure readings and alerts. Insurers can use this data to assess risk and offer discounts to drivers who maintain proper tire pressure.
• Advanced Driver Assistance Systems (ADAS): ADAS features like lane departure warning, automatic emergency braking, and adaptive cruise control will become more common in vehicles. Insurers may offer discounts to drivers who have cars equipped with these safety features.
• Black box event recorders: Black box recorders will continue to evolve, providing more detailed information about accidents and driving behavior. Insurers can use this data to determine fault, adjust premiums, and improve safety initiatives.

IoT data could also help us uncover new patterns that we weren’t necessarily searching for. These are just hypothetical examples, but they highlight the power of comprehensive IoT data. We could discover that certain times of day are statistically safer for driving. Or, perhaps drivers who frequently take long trips without incidents are inherently better at maintaining safety over extended periods.

We might also find that certain routes are statistically safer than others, leading to potential discounts for consistently choosing those routes.

Of course, the automotive industry is just one sector. We will see similar trends in home insurance, with IoT data for things like smart thermostats, security systems, and water leak detectors. Similarly, in health insurance, wearable devices can track heart rate, steps, and sleep patterns, helping insurers assess health risks and offer personalized wellness programs.

The future of IoT and insurance

IoT is increasingly intersecting with other cutting-edge innovations. Artificial Intelligence (AI) and Machine Learning (ML) are perhaps the two with the greatest potential impact on insurance risk assessment. With AI and ML algorithms, insurers can analyze vast amounts of IoT data to identify patterns and trends that humans may overlook. These predictive analytics can enable more accurate risk modeling, leading to more precise pricing and better risk management strategies.

And then there’s blockchain and 5G. Blockchain technology can enhance data security and transparency by storing IoT data on immutable databases. These databases are distributed across a network of computers, making it extremely difficult for hackers to tamper with or manipulate the data. Each new piece of data is added to a block, which is then cryptographically linked to the previous block. This creates a chain of blocks, or a blockchain, that is virtually impossible to alter without compromising the integrity of the entire chain. Blockchains can inspire more trust in insurance companies.

5G networks, with their low latency and high bandwidth, will enable real-time data transmission and analysis, allowing more responsive and personalized insurance services.

Lastly, IoT devices can improve the customer experience. For example, IoT-enabled devices can provide transparent pricing and usage-based insurance models, giving customers greater control over their insurance costs.

Final thoughts

The Internet of Things is already revolutionizing the insurance industry. With a growing number of IoT devices in homes, vehicles, and other environments, insurers have access to a wealth of data that can be used to improve risk assessment and offer more personalized coverage. As IoT technology continues to advance, we can expect even more innovative applications that will further enhance the insurance landscape.

Today, AI tools like ChatGPT, Midjourney, ElevenLabs, and FaceMagic have made it alarmingly easy to create deepfakes—realistic but fake images, videos, and voices. What’s even more alarming is that you no longer need to be a tech expert to whip up a convincing fake.

This rise in accessible AI tech has sparked serious concerns about how it can be misused, especially when it comes to creating deepfakes that can impersonate real people. These AI-generated deepfakes bring with them a host of risks, including identity theft, fraud, and a growing distrust in digital content.

Identity theft and fraud

Deepfakes are becoming a go-to method for bypassing biometric security systems. Imagine someone creating a fake version of your face or voice—this could be used to trick security systems into thinking it’s really you.

That’s how fraudsters can gain access to sensitive info or accounts without breaking much of a sweat. This isn’t just a minor nuisance; it’s a significant threat to both personal and organizational security.

Earlier this year, fraudsters used deepfake technology to impersonate the CFO of a multinational company during a video call. As a result, a finance officer was tricked into transferring $25 million. The entire meeting, which the employee believed was with real colleagues, was composed of deepfake recreations, according to Hong Kong police.

Erosion of trust and misinformation

One of the most concerning issues with deepfakes is how they can erode public trust. When you can’t tell if what you’re seeing or hearing is real, it becomes easier for people to be manipulated.

With this, even reputable media and news platforms are losing their integrity.

In March 2023, an AI-generated image of Pope Francis wearing a Balenciaga coat, created by Midjourney, went viral on social media. Many users, including reputable media outlets, initially believed the image was real before it was revealed as a fake.

Deepfakes could be used to create fake news or impersonate public figures, especially during crucial moments like elections. This makes it even more critical to develop ways to detect and regulate these deepfakes.

How can we tackle these risks?

 1. Advanced detection algorithms

To stay ahead of the game, we need to build and constantly improve AI-driven detection systems. These systems can pick up on subtle telltale signs of deepfakes—like weird facial movements or digital glitches—that might slip past the human eye.

However, this can turn into a cat-and-mouse game between AI detection developers and deepfake creators. As detection methods become more sophisticated, so too do the techniques used by those generating deepfakes.

This ongoing struggle requires constant innovation, where developers must anticipate and counteract the next wave of deepfake advancements before they become widespread. To effectively combat this, collaboration between researchers, technologists, and policymakers is essential, ensuring that detection algorithms evolve rapidly and are deployed widely.

 2. Blockchain technology

Since its onset in 2009, blockchain has had a number of practical uses due to its nature and functionality.

By embedding a unique digital signature in original media and recording it on a blockchain, any tampering or faking becomes much easier to spot. This could help ensure that what you see online is the real deal.

 3. Biometric security enhancements

Strengthening biometric security is another key move. We could start using systems that combine different types of biometric data, like facial and voice recognition, making it harder for deepfakes to fool security measures.

On top of that, enhancing liveness detection—ensuring that the person being scanned is real and not just a video—can help tighten security.

An example of a company already doing this is Apple. Apple’s Face ID not only uses facial recognition but also incorporates depth sensors and infrared imaging to ensure that a live person is being scanned, rather than a photo or video.

This combined with other security measures like multi-factor authorizations used by Google and Microsoft makes it even harder for fraudsters to gain access to systems using deepfakes.

 4. Regulatory frameworks and legal measures

Governments need to step up with laws that crack down on the malicious use of deepfakes, especially when they’re used for identity theft or spreading misinformation.

Another good idea that we see being implemented today would be requiring AI-generated content to be clearly labeled, so people can tell if something’s fake from the start.

 5. Insurance products

Cyber insurance policies could be expanded to cover losses from deepfake-related incidents, like identity theft or reputational damage.

Coalition Insurance has introduced a new AI coverage option to its Cyber insurance policies. This endorsement broadens the definition of a data breach to encompass incidents involving artificial intelligence, acknowledging AI as a potential security risk in computer systems.

Insurtech start-ups could also offer services to help detect and respond to deepfake threats, helping businesses bounce back quicker and limit their losses.

Bottom line

As deepfakes continue to evolve, so too must our defenses. AI-driven detection systems, enhanced biometric security measures, and specialized insurance products are all critical components in the fight against this growing threat. However, this is not just a technological challenge; it’s also a matter of collaboration and adaptability.

Insurance companies, particularly those in the insurtech space, have a unique opportunity to lead in this battle by offering products that not only provide financial protection but also contribute to prevention and response strategies. By working together—across industries and sectors—we can create a more secure digital landscape, where the risks of deepfakes are mitigated, and the benefits of AI are harnessed for good.

The recent CrowdStrike saga has shown that even the most reliable and widely used products can be prone to vulnerabilities.

This incident has sent ripples across various industries, including the insurance sector. Parametrix, a leading cloud monitoring expert, estimates losses by companies between $540 million to upwards of $1.4 billion, but only up to 20% may be recovered by businesses through cyber insurance. Planes were grounded, surgeries were halted, and emergency services became non-responsive.

While the loss figure doesn’t include Microsoft itself, CrowdStrike lost nearly $11 billion in market value almost overnight.

What really happened?

CrowdStrike, a leading cybersecurity firm from Austin, Texas, found itself at the center of controversy when a routine software update led to a catastrophic failure.

On July 19th, 2024, a configuration update for CrowdStrike’s Falcon software aimed at Microsoft Windows systems caused a major “logic error.”.

This error, stemming from a coding bug, resulted in millions of users encountering the “Blue Screen of Death,” leading to massive disruption across various sectors from healthcare, aviation, banking, and even emergency services.

In layman terms, a faulty Windows update led to over 6,500 flight cancellations and critical services disruptions.

CrowdStrike’s shares plummeted, with the stock closing at $256.16 on Friday, July 26^th, down from $343 on July 18^th before the issue arose. As of last Friday, the shares stood at $217.89.

Though logic errors are not something new, the devastating outcome was brought about by insufficient quality assurance and control of the software update. Simply put, there was not enough testing of the patch in various environments before it was released.

The role of cyber insurance

Cyber insurance has emerged as a critical tool for managing the risks associated with cyber threats. By providing coverage for financial losses resulting from data breaches, cyber-attacks, and other cybersecurity incidents, cyber insurance helps businesses recover and mitigate the impact of such events.

For insurance companies, offering cyber insurance policies is both a strategic move and a responsibility.

As the demand for cyber insurance continues to grow, insurers must develop comprehensive policies that address the evolving nature of cyber threats. This coverage provides compensation for costs related to business interruption, data recovery, legal fees, and even reputational damage.

Insurance companies must also consider partnering with reputable cybersecurity firms to ensure their systems are protected against the latest threats. These partnerships can provide access to cutting-edge technologies and expertise, helping to safeguard sensitive data which also maintains customer trust.

To stay ahead of the curve, advanced tech like artificial intelligence (AI) and machine learning (ML) can be leveraged. AI and ML can boost threat detection and response by quickly analyzing large volumes of data to spot unusual patterns and alert us to potential security breaches in real-time. This proactive approach allows insurance companies to respond swiftly to threats before they strike.

No accountability?

The CrowdStrike saga serves as a stark reminder that even the most trusted systems can be vulnerable.

Microsoft, one of the most reputable and valued companies for decades, fell prey to a faulty security update that rendered over 8 million of its machines useless.

Despite this, no accountability or disciplinary measures have been taken by either software company. For a disaster of this magnitude, product manufacturers like smartphone makers, food producers, and others would have faced significant fines.

Back in 2016, during the Galaxy Note 7 battery overheating fiasco, Samsung was not directly fined for the incident. However, the company lost over $5 billion in potential profits, along with a huge damage to its reputation. The amount was significant enough that Samsung began implementing an 8-Point Battery Safety Check, an improved and extensive quality assurance and control test for its batteries.

Earlier this year, Apple was fined $1.95 billion for violating anti-competition laws related to music streaming. Although Apple’s actions were intentional, this does not excuse the negligence exhibited last month by CrowdStrike and Microsoft.

While the fine print may protect CrowdStrike from liability in lawsuits brought by Delta, small businesses, and even some of the startup’s shareholders, regulatory authorities must take compliance action to prevent future oversight by other companies.

Thomas Parenty, a cybersecurity consultant and former U.S. National Security Agency analyst, summed up this ignorance perfectly:

“Until software companies have to pay a price for faulty products, we will be no safer tomorrow than we are today.”

Now, we should ask ourselves: How much did CrowdStrike really lose, and is that amount significant enough to deter it and other software companies from future negligent practices?

A concerning 73% of owners of small businesses reported cyberattacks in the previous year. Small and mid-size businesses (SMBs) are the target of approximately 43% of cyberattacks. What’s even more alarming is that only roughly 50% of SMBs have cyber insurance policies or coverage because it’s an additional cost that many cannot afford.

SMBs are more vulnerable since they lack the means to protect themselves effectively. Consequently, no one is “too small” for today’s cybercriminals. Nevertheless, even with constrained resources, SMBs may significantly strengthen their cybersecurity posture by combining efficient change management with artificial intelligence (AI), the most talked-about emergent technology available.

SMBs’ cybersecurity weakness: The pitfall of overvaluing compliance

Although it’s not always the case, many SMBs assume they are secure if they follow industry laws. Cybercriminals target different access points and data kinds during a breach, for instance, even though Payment Card Industry (PCI) compliance is a crucial tool to ensure the proper handling of credit card data and client information.

For this reason, small businesses must adhere to PCI compliance rules for protecting digital payments or risk fines from their payment processor. However, a yearly compliance action alone does not ensure a comprehensive adequate security posture.

SMBs typically lack the resources—time, manpower, and expertise—to develop, deploy, and manage their own cybersecurity capabilities. As a result, they tend to concentrate only on adhering to PCI compliance requirements rather than taking the essential actions to become more widely cybersecure. This is because a merchant’s digital environment may contain other areas that are open to cyberattacks if they choose to only implement PCI compliance in the card data environment.

SMBs need to be aware of numerous industry laws and best practices, including PCI Data Security Standard Version 4.0, which went into effect on March 31, 2024. Other frameworks that address general merchant cybersecurity for all industries and organizations, regardless of their size or level of cybersecurity skill, including the NIST Cybersecurity Framework and the FCC’s Cybersecurity Tip Sheet.

SMBs will have more work to do to maintain their cybersecurity and compliance posture because of hackers utilizing cutting-edge technology like artificial intelligence (AI) in addition to the growing use of mobile payments and contactless transactions. Sensitive consumer data was compromised by 39% of small firms in the past year, and more are sure to come given that cybercrime is predicted to cost the global economy $10.5 trillion by 2025. SMBs who don’t integrate their cybersecurity and compliance efforts run the danger of joining the 60% of small firms that shut down because of cyberattacks.

AI technology can be used by small firms to bridge this gap and lessen the strain of maintaining cyber resilience in the face of scarce resources.

AI: The key to uncovering hidden blind spots

AI is leveling the playing field for cyber resilience by assisting SMBs with limited funding and cyber knowledge in strengthening their security postures through:

Cutting through the clutter

What you cannot see is unassailable. To put it another way, 25% of workers at small businesses believe they lack the knowledge and resources necessary to recognize possible cyberthreats in the workplace. They lack the resources and knowledge to map out all digital assets at risk within a business, identify which vulnerabilities require patching, and determine which networks are most likely to be the next in line for attack. AI comes into play here.

Artificial Intelligence (AI) facilitates this process by giving small teams instant access to relevant information about vulnerabilities, possible security incidents, and remediation activities. This greatly expedites threat detection and response, enabling firms to remain ahead of the curve.

Though it’s not the sole tool, artificial intelligence (AI) is a potent one for SMBs, and its use will only increase with time. To provide a multi-layered strategy to identify cyber risks, AI solutions should expand upon the organization’s existing cyber tools (firewalls, endpoints, and vulnerability scanners that input security data to the AI model). The image of cyber danger becomes a high-resolution, color image when AI is used in conjunction with current cyber technologies.

Integrating compliance and cybersecurity measures

Due to PCI requirements and business needs, cybersecurity protection is becoming more necessary for SMBs in all sectors and regions. No longer can maintaining cardholder data security and preventing disruptions from cyberattacks be a “point-in-time” endeavor, as PCI and other compliance measures have historically been.

Businesses with little to no cybersecurity experience can put the necessary policies and procedures in place with the aid of industry best practices included in the NIST Cybersecurity Framework and FCC guidance, but these basic suggestions are insufficient to promote continuous cyber resilience.

Without requiring technical expertise or internal resources, AI technologies enable SMBs to quickly and effectively assess their cyber risk as part of the compliance process. AI solutions that integrate cybersecurity and compliance should be considered by SMBs. This will guarantee “always on” cyber defense in addition to adherence to industry rules and suggested baselines.

Eliminating the uncertainty

As generative AI (GenAI) chatbots advance, even non-technical staff of small and medium-sized businesses can more successfully establish and uphold cyber resilience and compliance with new industry requirements. Because every user has a different level of cybersecurity experience and different online and compliance security contexts, new GenAI chatbot capabilities can adjust the terminology, complexity, and level of detail of cyber events. This reduces the possibility of error by enabling everyone, regardless of skill level, to quickly identify their weaknesses and discover methods for mitigating risk.

Anticipating the future

Understanding where cyber threats are and how to best address each one necessitates a multi-layered strategy to SMB cyber risk management, comprising a combination of technology and process enhancements. Even though the dangers associated with cybersecurity and compliance are greater than ever, only 33% of SMBs have added new technology or processes to guarantee security in the last year. SMBs require assistance in the battle against cybercriminals, and AI is the co-pilot required to produce outcomes despite the leadership’s possible lack of experience and time.

AI isn’t just for big businesses; SMBs can also benefit from tools that help them prioritize which vulnerabilities to patch, recommend the best course of action for fixing those problems, and make sure they comply with crucial industry requirements like PCI. For SMBs, compliance and cybersecurity must become mission vital, or else they run the danger of being caught in the crossfire of cyberattacks.

Ensuring robust security measures is essential in today’s digital landscape, where cyberattacks are serious threats and data breaches occur frequently.

Traditional authentication methods like passwords and PINs are becoming less effective against sophisticated hacking techniques. For instance, brute-force attacks allow hackers to automate a series of letters and numbers to forcibly enter a system.With such security measures in place, hackers can easily access users’ personal files, finances, and other records, leading to potential blackmail and even bankruptcy.

However, with biometric authentication, a cutting-edge security system, there has been significant reduction of cyberthreats, and a higher level of security for sensitive information.

Understanding biometrics

Biometrics refers to the process of capturing and verifying an individual’s identity using unique behavioral or physical characteristics. Biometric scanners capture unique personal characteristics that are inherently difficult to replicate, making them a robust solution for security.

Unlike traditional authentication methods like passwords or PINs, which can be easily forgotten, stolen and even guessed, biometric identifiers are directly tied to an individual person.

Types of biometric systems

Depending on the biological information collected, biometric systems fall into several categories:

1. Fingerprint recognition: Utilizes the unique patterns of ridges and valleys on an individual’s fingertip.
2. Facial recognition: Analyzes facial features, such as the distance between the eyes, nose width, and jawline.
3. Iris scanning: Examines the unique patterns in the colored part of the eye.
4. Voice recognition: Identifies individuals based on the unique characteristics of their voice, such as pitch, tone, and speaking style.
5. Behavioral biometrics: Includes patterns in how individuals type, walk (gait recognition), or other means by which they interact with devices.

Biometric verification in insurance

The primary advantage of biometric authentication lies in its ability to provide highly accurate and reliable identity verification, significantly reducing the risk of fraud and unauthorized access.

In the insurance industry, this is a game-changer.

According to the FBI, the total cost of insurance fraud (excluding health insurance) is estimated to exceed $40 billion per year.

In medical insurance, where personal information is more prone to being hacked, the situation is even more severe. Solving medical identity theft consumes a considerable amount of time, and only 10% of patients report satisfaction with the resolution of their cases.

The same study explains that on average, patients, hospitals, and insurers spend over 200 hours addressing these incidents.

Roles & success stories of biometric systems in insurance

Numerous insurance companies are already leveraging biometric technology with positive results.

From using voice recognition systems for customer service to facial recognition for secure access to policy information, there are many practical uses of biometric systems in insurance.

Enhancing data protection & privacy

What makes Biometric data highly secure is the fact that it is unique to each individual and difficult to forge.

This ensures that sensitive information is better protected against unauthorized access, providing peace of mind to customers and complying with stringent data protection regulations.

While it is easy to brute force one’s way through PINs and password logins, it is nearly impossible to do so on a fingerprint or iris scan login.

Prudential, for example, has integrated biometric authentication into its mobile app, allowing customers to access their accounts using facial recognition, fingerprint scanning and voice (Prudential Voice). This not only enhances security but also improves user convenience, leading to increased customer satisfaction.

Preventing fraud & identity theft

Biometric systems significantly improve identity verification in the insurance industry by providing a secure and accurate method for confirming an individual’s identity.

By adding an extra layer of security that is difficult to breach, biometric data like iris patterns or voice recognition is unique to each individual and nearly impossible to replicate. This makes it challenging for fraudsters to impersonate someone else or create fake identities.

Streamlining customer onboarding & claims processing

Traditional methods of onboarding customers and processing claims often require extensive paperwork and manual verification, which can be time-consuming.

With biometrics, insurance companies can quickly verify identities using fingerprint scans or facial recognition, reducing the time needed for onboarding new customers or processing claims.

AuthID.ai, a data analytics and fraud prevention software company, provides biometric identity solutions that companies in all industries can implement in their customer onboarding process.

Conclusion

The integration of biometric authentication into the insurance industry represents a significant advancement in security and efficiency.

As traditional methods of identity verification become increasingly vulnerable to sophisticated cyberattacks, biometrics offers a robust solution that leverages unique biological characteristics to ensure secure access and data protection.

Biometric systems in tandem with other advanced security measures like Two-factor authentication (2FA) can help establish a comprehensive framework that enhances overall service and fosters trust among all insurance stakeholders.

The insurance industry sits on a mountain of personal data – health records, driving habits, financial details. It’s the fuel for innovation in Insurtech, but without responsible use and robust security, it becomes a liability. Here’s a harsh reality. An eye-watering 37% of consumers have already walked away from companies due to data privacy concerns. And 81% believe how you handle their data is a direct reflection of how much you value them as a customer.

These statistics reflect a growing distrust. Policyholders are asking: how is my data being used? Is it secure? Does the company truly value me as a customer, or just my information?

With this in mind let’s examine why transparency and trust are paramount, and how prioritizing data security can become a competitive advantage in the Insurtech landscape.

The data privacy landscape today

Consumers today are more conscious than ever before about their data privacy – 69% report feeling more worried than ever about their personal information. This heightened awareness isn’t born in a vacuum. Recent years have seen high-profile data breaches like the Facebook-Cambridge Analytica scandal, where millions of users’ data were harvested without consent, the Equifax breach that exposed the sensitive information of 147 million people, and the Marriott International incident, which compromised the personal details of approximately 500 million guests. And popular documentaries like Netflix’s The Social Dilemma have peeled back the curtain on how our data is collected, used, and sometimes misused.

The result? Around 70% of adults globally are actively taking steps to protect their online privacy. They’re deleting unused accounts, tightening privacy settings, and demanding greater transparency from the companies they interact with. This shift in consumer behavior presents a stark reality for the insurance industry: data privacy isn’t just a regulatory hurdle, it’s a bridge of trust to your policyholders.

What types of data does the insurance & Insurtech industry collect?

The insurance and Insurtech industries collect a vast amount of data to accurately assess risk, set premiums, prevent fraud, and provide better services to their customers. This data is essential for creating tailored insurance products and for the efficient functioning of the industry.

Here’s a breakdown of the data Insurtech collects, and why it matters:

• Personal information: Name, address, date of birth – the foundation for any insurance policy.
• Financial data: Income, assets, credit scores – used to assess risk and determine premiums. It might also include property and asset information, including things like the square footage of your home, the year your car rolled off the lot, whether you have a security system, and so on.
• Health information: Medical history, medications, lifestyle habits – crucial for health insurance and increasingly used for personalized wellness programs.
• Driving habits: Telematics data (think connected car sensors) can track mileage, braking patterns, and even location – used for usage-based car insurance and potentially to incentivize safer driving.
• Digital footprint: Browsing history, social media activity (with consent) – can provide insights into overall health, risk profile, and even potential safety hazards (like posting about extreme sports).
• Behavioral data: This can include gym memberships, loyalty program participation, or even public records of traffic violations. This broader picture helps Insurtech create a more comprehensive risk assessment.
• Claims history: Claims history can help insurance companies understand risk profiles and forecast potential future needs.
• Geolocation data (with consent): Real-time location tracking (e.g., through telematics), travel patterns, and geographic risk factors (e.g., flood zones) help in risk assessment, underwriting accuracy, and providing location-based services.

Regulations alone aren’t enough

Insurance companies operate within a stringent regulatory framework designed to protect consumer data. For example, the Federal Gramm-Leach-Bliley Act (GLB) mandates that financial institutions (including insurers) must fully explain their information-sharing practices to customers and offer them the option to opt out of sharing their sensitive information. Similarly, the California Consumer Privacy Act (CCPA) provides California residents with the right to know what personal data is being collected about them, if it’s being sold (and to who), and the ability to access, delete, and opt out of the sale of their personal information. Then we have the Health Insurance Portability and Accountability Act (HIPAA) which sets national standards for the protection of sensitive patient health information.

All insurance companies will be aware of these regulations and more. However, compliance alone is not enough. It’s crucial for insurers to transparently communicate their data protection practices to build consumer trust. Let’s get into how in the next section.

Building trust through transparency: How to communicate your commitment to data privacy

Today, policyholders are demanding transparency and control over their personal data, and that means insurance companies need to do more to communicate how they handle consumer data. Failing to do this can result in consumers going to your competitors.

To effectively communicate your commitment to data privacy:

• Be clear & concise: Don’t bury your data privacy policy in legalese. Craft clear, concise language that outlines what data you collect, why it’s necessary, and how it’s used.
• Less is more: Resist the urge to become a data hoarder. Clearly define the minimum data required for each insurance product or service. This demonstrates respect for policyholders’ privacy and reduces the risk of exposure to a breach.
• Data retention with a reason: Develop a data retention policy with clear timelines. Explain to policyholders how long you retain specific data types and the criteria for deletion. This builds trust and demonstrates responsible data management.
• Education is key: Don’t underestimate the power of clear communication. Utilize blog posts, explainer videos, and even infographics to educate policyholders about data privacy practices. This empowers them to make informed choices and fosters a sense of partnership.

Lastly, we have cybersecurity. Collecting data allows for more accurate policies and fuels the development of innovative products, so it’s not something insurance companies want to give up. And let’s not forget, it benefits policyholders too. However, any data collected should be protected with stringent cybersecurity measures.

Insurance and Insurtech companies should prioritize advanced threat detection systems, implement the principle of least privilege (limiting user access to only essential data), and utilize firewalls and network segmentation to prevent unauthorized access. These measures not only prevent attacks but also limit the damage if one occurs.

Final thoughts

In today’s data-driven world, ignoring data privacy is a recipe for disaster. By prioritizing clear communication, responsible data practices, and top-notch security, Insurtechs can turn privacy concerns into a competitive advantage. The choice is clear: embrace data privacy or risk losing policyholders.

Now more than ever, insurance companies have become prime targets for cyber threats. Insurers handle vast amounts of sensitive data, making them attractive to cybercriminals.

Also, the increased attack surfaces from reliance on technology for efficient and seamless operations make insurers and others in their ecosystem—such as intermediaries, vendors, and policyholders—easier targets.

For insurers, having strong cybersecurity isn’t just about following the rules—it’s essential for protecting their business.

This article looks at specific cybersecurity strategies to help insurance companies protect their assets, reputation, and customer trust.

The impact of cyber risks

Cyber risks pose significant financial challenges to insurance companies, often resulting in a surge of claims related to breaches, ransomware attacks, and other cyber-related damages. This can substantially increase the financial burden on insurers due to higher claims payouts.

Additionally, insurers that cover ransomware payments may face huge financial demands. Even if they don’t cover such payments, they still incur high costs from legal battles and recovery efforts.

Cyber attacks can also disrupt operational activities, leading to lost revenue and increased costs associated with remediation and recovery.

The dynamic nature of cyber threats complicates underwriting risks for insurers. As mentioned earlier, insurers become prime targets for cyber attacks because they hold sensitive customer data. Data breaches can expose this confidential information, leading to regulatory fines and a significant loss of customer trust.

Breaches can severely impact an insurer’s reputation, making it difficult to attract and retain customers.

Cybersecurity solutions for insurers

 1. Advanced threat detection & response

Insurance companies must stay ahead of sophisticated cyber threats by employing advanced threat detection and response systems. These systems utilize artificial intelligence and machine learning to identify and mitigate potential threats in real time.

CrowdStrike 

CrowdStrike’s Falcon platform is renowned for its next-generation endpoint protection, offering real-time threat detection and response capabilities. By leveraging AI-driven analytics, CrowdStrike helps insurance companies detect threats swiftly and minimize potential damage.

 2. Data encryption & protection

Ensuring that sensitive customer data is encrypted both at rest and in transit is crucial for preventing unauthorized access and breaches. Encryption transforms data into a secure format that can only be deciphered by authorized parties.

Symantec (now part of Broadcom Inc.)

Symantec’s Data Loss Prevention (DLP) solutions provide robust encryption and data protection tools. These solutions help insurance companies safeguard sensitive information, ensuring compliance with regulatory standards and protecting against data breaches.

 3. Identity & access management (IAM)

Identity and Access Management solutions control who has access to what information within an organization. By implementing strong IAM protocols, insurance companies can ensure that only authorized personnel have access to sensitive data and systems.

Okta 

Okta’s Identity Cloud offers comprehensive IAM solutions, including single sign-on (SSO), multi-factor authentication (MFA), and lifecycle management. Okta enables insurance companies to manage user identities securely and streamline access to critical applications.

 4. Security information & event management (SIEM)

SIEM systems aggregate and analyze activity from various sources across the IT infrastructure, providing a centralized view of security events. This enables insurance companies to detect and respond to incidents more effectively.

Splunk

Splunk’s SIEM platform offers real-time monitoring, advanced analytics, and automated response capabilities. By integrating data from multiple sources, Splunk helps insurance companies gain comprehensive visibility into their security posture and respond to incidents swiftly.

 5. Cloud security

As insurance companies migrate to cloud environments, ensuring the security of cloud-based applications and data is paramount. Cloud security solutions protect against threats specific to cloud infrastructure and services.

Palo Alto Networks

Palo Alto Networks’ Prisma Cloud provides comprehensive cloud security, covering infrastructure, applications, data, and access. It helps insurance companies secure their cloud environments, ensuring compliance and protecting against cyber threats.

Bottom line

For insurance companies, investing in robust cybersecurity solutions is not just about protecting data but also about maintaining customer trust and ensuring regulatory compliance. By partnering with industry-leading cybersecurity firms like CrowdStrike, Symantec, and many others, insurance companies can fortify their defenses against an ever-evolving cyber threat landscape.

Implementing these solutions helps safeguard sensitive information, ensuring the continuity and integrity of business operations in the digital age.

The Insurtech industry is revolutionizing insurance with technology, offering faster, smarter services that benefit everyone. Thanks to Insurtech companies, customers today enjoy instant claims processing, laser-fast customer service, and personalized policies. Insurers get real-time data insights that further fuel innovation. But with these advancements come new risks.

Insurtech companies are a prime target for cybercriminals. Why? Because they house vast amounts of sensitive personal and financial data. Protecting this information isn’t just a technical necessity—it’s essential for maintaining trust and integrity, both for customers and clients, but also for the industry. With this in mind, let’s explore cybersecurity risks and solutions for the Insurtech industry in 2024 and beyond.

Cybersecurity risks

Data breaches

In a data breach, unauthorized individuals (hackers) gain access to sensitive, confidential information. Data breaches are rife. For example, insurance broker Keenan & Associates suffered a major data breach in 2023, impacting 1.5M individuals. And back in January this year, life and health insurance giant Washington National Insurance Company fell victim to a SIM-swapping attack that saw over 20,000 people affected. More generally, annual data breaches in the US have increased more than threefold since 2012, while the average cost to US businesses has surged by 60%.

When it comes to data breaches, not all targets are equal, although all industries are impacted. For example, the industry that suffers the most data breaches is IT, software, and tech services. This may surprise some people because you’d expect companies in the tech sector to employ stringent cybersecurity measures. The truth is, that many companies are committed to cybersecurity, but tech companies, including Insurtech companies, are such a lucrative target that robust and quality cybersecurity measures are paramount.

It’s important to note that the term data breach specifically refers to the exposure or theft of data itself, but there are many methods through which data can be stolen, and each presents unique risks. Let’s look at some of the methods that result in a data breach.

Ransomware attacks

Ransomware attacks, where malicious software encrypts a company’s data and demands payment for its release, are one of the primary causes of data breaches. Ransomware attacks can bring a company’s operations to a standstill, leading to financial losses and data theft. For Insurtech companies, the consequences are severe: lost revenue, compromised sensitive information, and damaged client trust. Shockingly, 20% of the costs from ransomware attacks stem from the blow to a company’s reputation.

The most common entry point for ransomware attacks is phishing, which brings us to our next risk.

Phishing and insider threats

Phishing involves deceptive emails or messages that trick employees into revealing sensitive information or clicking on malicious links. For example, an employee might receive an email claiming to be from the CEO, urging them to act quickly on a fake invoice. These messages often create a sense of urgency, prompting hasty actions. Insider threats, whether intentional or accidental, pose additional risks. Employees with access to sensitive data can inadvertently or deliberately cause breaches.

Third-party vulnerabilities

Insurtech companies often rely on third-party vendors, which can introduce significant security risks. Vendors may have access to sensitive data and systems, creating potential entry points for cybercriminals. Many companies also use open-source code, which, while beneficial, can contain vulnerabilities. If hackers find these vulnerabilities, they can potentially access countless different software systems.

Threats in a tech-fueled world

One of the more pressing concerns today is how increasingly powerful software and systems are shaping the cybercrime industry. Cybercriminals are now using AI to craft scarily convincing phishing emails, making it harder to rely on traditional red flags like spelling and grammar errors.

Similarly, the rise of cybercrime-as-a-service has changed the landscape. Cybercriminals now offer ransomware software to aspiring hackers who may not be tech-savvy, for a monthly fee. This lowers the bar for entry, allowing more people to engage in cybercrime. The combination of AI-enhanced phishing and accessible cybercrime tools means companies must be more vigilant than ever in their cybersecurity efforts.

Solutions – combating cybersecurity risks in Insurtech

So, we’ve covered the risks, but how do Insurtech companies go about combating them? Let’s look.

• Advanced encryption: Implement robust encryption methods for protecting sensitive data both at rest and in transit. Use strong encryption standards like AES-256 to ensure that intercepted data remains unreadable without the correct decryption keys.
• Multi-Factor Authentication (MFA): Implement MFA to add an extra layer of security by requiring multiple forms of verification before accessing sensitive systems. This reduces the risk of unauthorized access, even if passwords are compromised.
• Regular security audits and penetration testing: Conduct regular security audits and penetration testing to identify and address vulnerabilities proactively. Comprehensive assessments help find and fix security gaps, keeping the company ahead of potential threats.
• Employee training and awareness: Regular training sessions for employees help them recognize phishing attempts and other cyber threats. Emphasize the importance of following security protocols and reporting suspicious activities to create a well-informed and vigilant workforce.
• Incident response planning: Develop and maintain a robust incident response plan outlining steps to take immediately after a breach is detected, including containment, eradication, and recovery processes. Regularly update and test the plan to ensure the team is prepared for an effective response.
• Stringent access control: Employ the principle of least privilege, where users only have access to the systems necessary to perform their jobs. This massively limits what data can leak during a phishing attack.
• Cybersecurity insurance: Invest in cybersecurity insurance to mitigate the financial impact of a cyber-attack. This insurance covers costs associated with data breaches, ransomware attacks, and other incidents, providing access to specialized response teams and resources for quicker recovery.

Wrapping up

In today’s hostile cyber environment, Insurtech companies are prime targets for attacks. Robust cybersecurity isn’t optional—it’s a must. By taking deliberate measures like advanced encryption, multi-factor authentication, and regular security audits, companies can protect their systems and keep sensitive data safe from malicious actors.