INCREASE in cybercrime has been ranked the number one concern by insurers in South Africa. This is according to a new report released by the Centre for Study of Financial Innovation (CSFI) and PWC.
The report shows that this risk is likely to change insurances structural and business models in the long term. Cyber risk is ranked fourth on the combined global survey.
Growth in cybercrime is becoming a big concern for the insurance industry. This together with tougher regulatory environment and poor economic growth prospects are also hampering the sector.
The South African Banking Risk Information Centre shows that South Africans lose excess of R2.2 billion annually to internet fraud and phishing attacks.
Victor Muguto is head of Insurance at PWC says, “This is a new risk, it has not yet been fully scoped and very difficult to price for, so the global market and SA market are still coming to grips with how to price for the risk.
What is also important from a corporate perspective is that insurers and anyone holding client information on their data base interacting with the public need to protect that information.
This is now a new risk which has come to the top of our risk survey for the first time in seven years.” Director at PWC Sidriaan De Villiers adds,” What we have definitely seen is that organisations are spending more money on cyber security.
They are building capacity and appointing more people who are dedicated to look after cyber security. All sorts of companies are spending more money on cyber security and obviously based on the type of information and the risk profile and cyber defence in place,the organisation will look at insurance against the risk of cyber incidences.”
De Villiers says cyber risk is on the increase as a result of improved technology. “The landscape for the past 10 years we have seen a conversion of technology. Technology is now internet device connected.
The number of internet connected devices per person in the world has almost tripled and doubled in the last 10 years.It’s easier to access the internet and also easier to access applications that you use in your work environment but also in your personal capacity.
And a single point of failure will obviously compromise other environments.” Muguto says many insurers are also facing disruptive challenges, amongst the changes in the regulatory environment, particularly in South Africa. “There has been a lot of preparation to deal with the solvency two requirements which come into effect in 2016, together with the treating customers fairly requirements on the market side and both those two are driven by the twin peak frameworks which has been adopted by national government as a policy framework to not only look at the solvency requirements of financial institutions insurers but also to look at the market conduct side,”says Muguto.
The CSFI latest Insurance Banana Skins survey polled over 800 insurance practitioners and industry observers in 54 countries.
There were 35 respondents from South Africa and 42 in total from Africa. Regulatory risk emerged as the overall global top risk for practitioners for the third consecutive time.
Concerns were also high among South African respondents that insurers were not making the best use of technology to develop new distribution channels. The sector has been slow to keep pace with new technology. Insurance penetration rates are relatively low on Africa compared to the rest of the world.
Source: Guardian Newspaper