June 16th, 2017

Cyber Risk Pervades All Classes, But Creates Huge Industry Opportunity, Says Motta; MMC Young Professionals’ Global Forum 2017

Posted at 4:30 AM ET

Cyber risk likely will become the single most pervasive risk that society faces, maybe even more so than climate change, according to Joshua Motta, co-founder and CEO of Coalition.

Cyber security is broken, nothing is secure, nobody can defend themselves and the adversaries are unknown, Mr. Motta told delegates at the MMC Young Professionals’ Global Forum in London on Thursday.

But the insurance industry has an opportunity to facilitate transfer of the risks cyber poses to companies, he said.

The perpetrators of cyber threats have a huge advantage over those trying to defend against it, he said.

To use a sporting analogy, “the defense cannot even see what the offense is doing,” Mr. Motta said.

Cyber risk also has a human element - whether the risk is caused by accident or intentionally and maliciously, he explained.

“So, our understanding of the risk has to take into account the human aspect - this is not just a tech problem,” he said.

This human element makes cyber risk a difficult one to model for actuaries, he explained.

There are 8.4 billion devices in the world, all of which can be hacked, he said.

“We hack ourselves on a daily basis,” and unconsciously leak our own data all the time, he said.

Cyber also touches “literally the whole spectrum of risk” - it can cause explosions, bodily injury, product recall and so on, Mr. Motta said.

But most cyber coverages focus on data breach.

And while billions of dollars are spent on cyber security, the hackers are always one step ahead, he explained.

“As a driver to better risk management, today’s cyber insurance products are a bit like eating soup with a fork,” he said.

There are huge opportunities for the insurance industry to create products that match the exposures, he said.

The only way to reduce the costs of a cyber event “because you cannot eliminate the risk” is to transfer it, Mr. Motta said.

Currently, however, most cyber underwriting decisions are based on qualitative or subjective information - the underwriting information does not have context, he said.

Nonetheless, Mr. Motta said he believed that by using different ways of thinking insurance underwriters can provide cyber solutions.

Underwriters should use “first principles” thinking, he said, and look at the fundamental facts of a situation and assess how to solve problems, rather than go along with the way the rest of the world is thinking.

In addition, he said, underwriters should use the “job to be done” philosophy - which encourages improvements to products.

Also, he said, insurers need not necessarily simply ask the customer what they want, but instead should provide solutions.

He quoted Henry Ford who said, “If I’d asked the customer what they wanted they’d have said ‘a faster horse.’”

Cyber will touch all the areas of the insurance industry and this gives young insurance practitioners a huge opportunity, he said.

“You’ve joined the insurance industry at a very interesting time in our collective history,” he said.

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Joshua Motta, co-founder and CEO of Coalition, addressing delegates at the MMC Young Professionals’ Global Forum

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