After Covid, SMB's spend on cyber insurance rising

Earlier cyber insurance was a product targeted towards large businesses among the high-risk healthcare, financial, professional services and IT sectors. "But the recent trends have highlighted the increased cyber security spends among the small and medium size businesses (SMBs)," says Alok Agarwal, Executive Director, Wholesale, ICICI Lombard General Insurance Company in an exclusive interview with Bizz Buzz

How is the demand for cyber security pre-covid and post-covid?

The outbreak of Covid-19 accelerated the digital transformation but brought along with it numerous challenges for the business organisations around the world. Earlier cyber insurance was a product targeted towards large businesses among the high-risk healthcare, financial, professional services and IT sectors but the recent trends have highlighted the increased cyber security spends among the small and medium size businesses.

As a leading liability insurer of India, we are witnessing a slight pivot in the requirement of cyber insurance towards small-medium businesses. As digitisation gains pace, the number of digital transactions (both monetary and non-monetary) will only increase in the coming years. As the world becomes increasingly digital, regulation will continue to be a primary driver of cyber insurance development.

What is the framework for corporate India risk index?

We believe risk management is an essential corporate responsibility; the corporate India risk index extends beyond these areas to give a comprehensive and quantified view of risk exposure and risk management. As part of our partnership with Frost & Sullivan, a global consulting firm, we have created a standardized matrix for corporate risks for India Inc.

ICICI Lombard corporate India risk index is a comprehensive framework, which covers 32 risk elements across six risk dimensions (Market and economy, operational and physical, technology, crime and security, natural hazards and pandemic and strategic risks).

What is new in the risk index 2021 compared with 2020?

CIRI 2021 is the second edition of ICICI Lombard corporate India risk index - this time it covers 220 companies across 20 sectors. Agriculture and food processing, biotech and life sciences, aerospace and defence, media and gaming, and education and skill development are the five new sectors included to the index.

Some existing sectors have been restructured to give them more prominence, such as media and telecom, which has been split into telecom and communication and media and gaming. This year, there is a special emphasis on small and medium businesses.

What are the key highlights of the Corporate India Risk Index?

As pandemic-related limitations lifted, sectors showed varying degrees of recovery as risks connected to resource scarcity, project delays due to pandemic, and financial risks owing to tax relaxation were all mitigated.

We discovered that the risk index climbed from 57 to 62 in the CIRI 2021, indicating that Indian enterprises are becoming more conscious of enterprise-related risks and taking steps to mitigate them.

All 20 sectors have been classified into 3 large categories basis their risk Index:

• Superior (risk index between 65-75), optimal (risk Index between 55-65) and sub-optimal (risk Index between 40-55).

• Sectors which achieved superior risk Index in 2021 are – Pharmaceuticals, transportation and logistics, chemicals and petrochemicals, agriculture and food processing, FMCG, telecom and communication, automotive and ancillary, BFSI, healthcare and delivery, and tourism and hospitality.

What would be your recommendation to achieve superior risk index?

External environment:

• "Envisioning" risk through tail-risk assessment, stress-testing and scenario planning

• De-risking by focusing on multi-product, multi-geography, multi-customer and multi-industry

Internal system & procedure:

• Preventable internal risks managed through rule based control model

• Developing mission statement, value and belief system, standard operating procedure, internal control and audits

Leadership:

• Swiftly anticipating short term changes and taking efficient steps to mitigate their impact

• Setting up the right tone and creating conducive environment within which risk management is carried out

Predictive future analysis:

• Predictive analytics to be used to provide organization with actionable insights

• Extrapolating insights, creating likely scenarios to predict future events

Why choose ICICI Lombard for all your Business Insurance? Please talk on ICICI Lombard's business insurance portfolio which includes different types of insurance solutions covering property damage, transport of goods, legal liability, cyber security, employee-related risks across sectors?

Insurance is a physical intensive industry that has witnessed an increase in digital fulfilment methods being adopted in the insurance life cycle. Touch-less and contactless have become new buzzwords, as consumers and organizations look for digital means of fulfilment.

As customers continue to purchase insurance through various channel like bank tie-ups, motor dealers, agents and brokers, as well as directly through online and telephone channels we are focusing our energy on making each of these channels have a seamless digital experience from acquisition to policy issuance and service. At ICICI Lombard, we developed new generation products including cyber insurance, telemedicine, and cashless homecare during the pandemic.

Please talk on how the company has been adopting latest technology like, robotics, artificial intelligence, machine learning, Internet of Things (IoT) etc, in servicing the customers?

The insurance industry continues to undergo transformations, and insurers must continue to adapt and change in order to succeed. If you look at the top companies, only those that re-invented themselves continue to thrive. This is true for any sector, and even more so for an industry like insurance, which continues to face new challenges, such as pandemic climate change, privacy protection, and even hybrid working.

We are seeing change in products like motor insurance, where we use telematics to analyse driving behaviour to estimate risk. With driverless cars, risks will shift from the individual driver to the AI-enabled software. As this occurs, integrating data from on-board sensors with other ecosystem data will enable insurers to provide near-real time pay as you drive coverage.

With genetic advances and a deep understanding of the human genome, genetic underwriting could become highly personalized. We're now seeing data from wearable devices that are allowing insurers to better understand customer behaviour and the impact that maintaining a healthy lifestyle has on their premiums. We're seeing information from wearable devices and our own ILTakeCare app helps us understand customer behaviour on a regular basis when it comes to health and diet.

Today, risk inspection is done physically at commercial locations, but it won't be long before drones and satellites, using real-time data, enable real-time inspection of risk. We have already investigated drone-based risk inspections, which have proven to be highly useful during natural disasters and calamities such as floods and earthquakes.

Many organizations, including our own, are experimenting with AI/ML solutions across distribution and claims, but it won't be long before we see a smart underwriter - an algorithm that makes underwriting decisions based on massive amounts of data. Or a digital claims adjuster that will examine video, audio, and image files to settle a claim within minutes as opposed to multiple days today.

On the technology side, we were one of the first insurance companies to move to the cloud. Cloud adoption is clearly helping us in being nimble, reliable and scalable and helping us in the advancement of our data and AI/ML journey.

The move to the cloud also means that we have had to make significant changes in our IT operating model. We had to reskill and upskill our existing workforce in new technologies on data, engineering and AI/ML, and also in new ways of working like Agile and DevOps.

Some of the things that we are doing include progressive modernization of our technology stack, architecting our applications for optimal utilization, and moving to an open shift technology (open architecture) has helped us to become truly cloud native and exploit the full benefits of the cloud.