Machine learning can boost cyber risk management

Intelligent automation and machine learning technologies can help businesses and their captive insurers address cyberattacks in microseconds, experts say.

Businesses should harness these advanced technologies to bridge the gap between the rapid rate of attacks and their cybersecurity response time, attendees heard at the recent Captive Insurance Companies Association 2023 International Conference (CICA).

Information technology organisations use “bows and arrows” to respond to bad cyber actors that are deploying high-speed attacks, said Michael Steep, founder and executive director of the disruptive technology programme at Stanford University and president of consultancy Transform Innovation Ventures.

“The problem is the technology to fight (attacks) is super slow, and in some cases obsolete. That is the reason why cyber insurance is now experiencing this big financial crisis,” Steep said during a panel session.

“We cannot figure out what the risk factor is in a fast enough time to be able to address these concerns,” he said.

In addition, hackers backed by nation-states are manipulating information via artificial intelligence technologies, leading to greater high-speed attack vulnerabilities.

“We must rethink how to enable sub-second response against data breaches,” Steep said.

Stephen Cardot, CEO of cybersecurity firm CloudCover, said that while the insurance sector traditionally looks back at historical loss scenarios and loss ratios, businesses are starting to think about cybersecurity strategies that anticipate cyber threats.

“People can get all spooked out, but AI, quite frankly, is a useful tool when it’s applied correctly. I don’t refer to AI as artificial; it’s actually augmented, or autonomous, or automated intelligence,” Cardot said during the panel discussion.

AI-generated technology and machine learning are “a game-changer” because they can help businesses and insurers predict cyber threats before they occur and address them in real-time, he said.

The total cyber insurance market was estimated at roughly $10bn in premium in 2022, but is expected to grow to up to $25bn by 2025, said Nick Pearson, vice president of BMS Group.

“It’s been a very hard market and that means pricing is going up, up, up,” Pearson said.

Prices increased by up to 400% in 2021 but since then cyber rates have “levelled off,” with some books seeing increases more in the 10% to 50% range, he explained.

Increasing use of AI, including chatbots such as ChatGPT, creates risks but also present opportunities to improve risk management, Mark Field, director, risk and insurance operations team, office of the general counsel, at Sutter Health, a health care system, said during another panel session at the CICA conference.

“Risk management and insurance decisions or events are driven by data,” Field said.

“Think of yourself as a primary care physician and your patients are your insurance claims information, underwriting information, exposure information. Wouldn’t it be nice if you could have assistance to pull data information from large datasets to make better decisions?” he said.

There’s a trend toward AI improving decision-making for risk managers and insurers, he said.

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