Cyber Security Gains More Regulatory Attention
Robert Regis Hyle | March 02, 2015
There are two words that throw the fear of god into the face of any insurance carrier: regulatory compliance. The big reason for the woe these words bring to carriers is that instead of getting easier over time, compliance has become even more difficult.
The reasons are twofold. The regulatory landscape is expanding constantly. Insurers not only deal with the traditional group of regulators from the 50 states, but they have been forced to focus more energy on what the federal government is up to. In addition, as insurers seek to grow they are looking to global markets and that creates another set of issues.
The second regulatory challenge involves the privacy of a customer’s data and securing it from outsiders. Regulators never feared data attacks on brick and mortar insurance carriers, but no one operates in that manner anymore. Data is out there waiting to be snatched from thin air and that troubles not just regulators but all of us.
As Deloitte’s Howard Mills explains, the traditional job of regulators involves consumer protection and that has brought scrutiny to how carriers secure a customer’s most important data. Insurers should relish that attention because the second part of unsecured data is the damage that befalls insurers when customers learn their insurer’s data systems have been breached.
Insurers can deal with unhappy customers and there are effective measures to appease them, but the embarrassment to the insurer’s brand is becoming even more important as consumers make a mental note that a breached insurance carrier may not be the company where you wish to place your business.
Insurers have enough concerns of their own in data security that some may see the strong regulatory push as being heavy-handed, but regulations are likely to become more complex and burdensome in the short term. The New York Department of Financial Services last month issued a report on cyber security that it believes will strengthen hacking defenses for carriers.
The New York DFS surveyed insurers with respect to cyber security and found a wide array of factors affect the sophistication and comprehensiveness of their cyber security programs. While many believe the top tier of carriers have the most sophisticated defense systems, the DFS study did not find that to be the case.
In short, regulators are going to keep an even closer eye on what is happening in cyber security and Mills predicts that it won’t take long for the other states to follow.
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