Cyber Insurance – Let the dance begin

Posted on May 23, 2016


No imagination needed, as HM Government and Marsh (leading broker and insurance advisor) report lays out starkly,  ‘UK cyber security: the role of insurance in managing and mitigating the risk’, on the current big thing in Insurance for the London markets, no not lunch! The Cyber Insurance market opportunity and how this could see Lloyds of London as the leading and driving force behind a British business Cyber Security hygiene revolution. In so doing help UK industry ride the Cyber security threat wave, as others flounder in the face of the tsunami, UK Business enjoying a competitive advantage as they lead the adoption of Cyber Security as a core component of their operations. In so doing Lloyds will open its own eyes to its own wider digital potential. Or could a more agile Insurance Sector from a more digitally savvy emerging market steal the thunder?

That report was dated March 2015, so Lloyds Insurance, your on notice …..

Digital transformation is what the lucky ones refer to it as. The rest, purveyors of entrenched attitudes, are not around to comment. They are the victims of cultural malaise, blind to warnings broadcasted in balance sheets and Profit and Loss accounts. Or perhaps they are just ‘suicide cases’ who condemn businesses to premature extinction doggedly pursuant of quaint, traditional, industry practices.

Lloyds of London

Welcome to the Lloyds Insurance Markets that are currently evolving (ie: ‘TOM’ Target Operating Model) according to Mark Twain’s supposition that:

Habit is habit, and not to be flung out the window by man, but coaxed downstairs, a step at a time.”

… whilst the rest of the world is moving on from using escalators to high speed lifts and a few going for not Moon shots but Mars. Infinity and beyond …….

Back on earth, what does this disruption look like?

  • Think telematics
  • 20%+ product cost savings
  • Increasing customer choice and control.
  • Real time, online market(s)
  • New customer engagement and retention service opportunities
  • A shift from reactive to a proactive risk prevention attitudes
  • Automation of manual processes and direct customer interfaces
  • A common consistent approach and communication language
  • Digitisation of policies and contracts
  • Increased return from deployed capital
  • Visibility and reduction of Risk Exposures:
    • Accumulation
    • Systemic
    • Supply chain
    • Claims
    • Litigation
  • Transparency of Claims and the holy grail BIG DATA.

… and more.

There are NO exceptions

Even the heavily regulated industries, such as Finance are floundering in the face of breaches to its bastions of market control and monopoly. They are scrambling to innovate before they get innovated out of relevance. As for less controlled market sectors, anything that can be digitally commoditised and or automated will be, closed shop, protectionist practices or high street dominance will NOT survive an ‘Uberizing’ event and the recruitment of digital labour.

In the face of these new economic realities, what odds of survival would you give an industry that:

  1. Is steeped in traditional manual face to face transactional practices?
  2. Has a supply chain that generates product delivery friction that inflates customer costs by 45% and more?
  3. Where product costs go up by an average 3% per annum in inflation adjusted terms?
  4. Are funded by syndicates that are incurring avoidable Capital exposure and inefficiency in a collective behavioural bubble?
  5. Is already a trillion-dollar industry that is growing despite its legacy culture?
  6. Defines innovation as the ‘electrifying’ of existing practices and process, in an attempt to evolve without threatening the status quo. Akin to replacing manual typewriters with electric when all around have relegated the typing pool to history and evolved into 2nd generation real time electronic communications, if not the 3rd generation realms of Cognitive ‘Digital Labour’ automation based on adaptive machine learning and artificial intelligence.

Survive and Thrive

In military circles there is a term used in threat situations, ‘getting off the X‘.

The Observe > Orientate > Decide > Act (OODA) thought discipline is drilled into Air Force pilots, special forces and secret field agents and their ilk, because the ones who can loop through this process the fastest and ‘ACT’ first (getting off the ‘X’) are the ones that come home. It has evolved from the military to become an important concept in business strategy, ignored at businesses peril. It is key to survival in the fast paced, data driven economics of ‘Cognitive Digital Labour’ that will if it has not already, disrupt all industries swirling around like tops in the ‘Digital Vortex‘. (You may associated better with it under its touchy feely marketing nomenclature of Digital Transformation‘).

Transformation masks the true challenges facing businesses. In Silicon Valley terms it’s called ‘Uberization‘ from the now infamous Uber taxi booking service mobile application that took the traditional taxi world by storm. The Uber generation and the on rush of the Internet of Things (IoT) is the technologically-driven economic shift optimising existing jobs and services into discrete tasks. Tasks that can be requested on-demand combining real-time data, mobile payments, instant fulfilment and dynamic pricing that is challenging the status-quo. This is manifested in the Digital Start-ups that stalk markets looking for sub-optimal signals in the form of entrenched practices and process. Once identified they deploy their digital solutions and drive new value enjoying exponential growth from the bloated costs of inefficient supply chains and fat margins of complacent product and or service dominance. They displace the old models with new, under the very noses of the establishment, evolving conventional industries in many cases beyond recognition if not into extinction. Bold and fearless, smashing through barriers of entry, where sector knowledge was once regarded as a bar to entry today it is often more of a hindrance than a benefit to the dynamics of digital disruptive economics.

Do not fear, Louie Gerstner when he was at IBM led a great enterprise through dramatic change and shows it can be done. Captured in his book – ‘Who Says Elephants Can’t Dance?

So Lloyds of London, don’t just believe in the art of the possible, get your dancing shoes on and show us your moves.