The Marsh brokerage unit of Marsh and McLennan recently announced a new evaluation process called Cyber Catalyst designed to determine the usefulness of enterprise cyber risk tools.

The goal of the new offering is to identify and implement industry-wide standards to help cyber insurance policyholders make more informed decisions about cyber-related products and services; basically, what works and what doesn't. Other major insurers participating in Cyber Catalyst include Allianz, AXA XL, AXIS, Beazley, CFC, and Sompo International.

While this collaboration between insurance companies is unusual, it's not entirely surprising. Cyber insurance is a $4 billion market globally. While it's difficult to accurately gauge how many hacking attempts were successfully foiled by the products targeted here, data breaches and cyber attacks on businesses continue to increase in frequency and severity. The 2019 World Economic Forum's Global Risks Report ranks "massive data fraud and theft" as the fourth greatest global risk, followed by "cyber-attacks" in the five slot.

Meanwhile, cybersecurity products and vendors have been, to be charitable, a mixed bag.

Good in Theory

From this standpoint, Cyber Catalyst seems like not just a good idea, but an obvious one. A standardized metric to determine which cybersecurity solutions are no better than a fig leaf and which ones provide real armor to defend against cyberattacks is sorely lacking in the cybersecurity space. By Marsh's own estimates, there are more than three thousand cybersecurity vendors amounting to a $114 billion marketplace. Many of them don't inspire confidence on the part of businesses.

Insurers have a vested interest in determining the effectiveness of cybersecurity products, weeding out buggy software and promoting effective solutions that can help address risk aggregation issues. Businesses and their data are in turn better protected, and at least in theory, they would pay less for coverage. Everyone wins.

Insurance companies did something similar in the 1950s with the creation of the Insurance Institute for Highway Safety. In the face of rising traffic collisions and fatalities, the insurance industry collaborated to establish a set of tests and ratings for vehicles, and the result has been a gold standard for automotive safety for decades. Using a similar strategy for cybersecurity would at least in theory help mitigate the ever-increasing costs and risks to companies and their data.

Or Maybe Not

Where the analogy to the Insurance Institute for Highway Safety breaks down is here: The threats to car drivers and passengers have ultimately stayed the same since its inception. Everything we've learned over the years about making cars has progressively led to safer vehicles. Information technology is vastly different in that iterative improvements in one specific area doesn't necessarily make an organization as a whole safer or better protected against cyber threats--in fact sometimes it can have the opposite effect when a new feature added turns out to be a bug.

Cyber defenses are meaningless in the presence of an unintended, yet gaping, hole in an organization's defenses. Then there is the march of sound innovation. Products that provided first-in-class protection for a business's network a few years ago may no longer be so great where cloud computing and virtual servers, or BYOD are concerned. The attackable surface of every business continues to increase with each newly introduced technology, and it seems overly optimistic to assume the standard evaluation process (currently twice a year) would be able to keep pace with new threats.

There's also the risk of putting too many eggs into one basket. While the diffuse nature of the cybersecurity market causes headaches for everyone involved, establishing a recommended solution or set of solutions effectively makes them an ideal target for hackers. While it's important to keep consumers and businesses informed of potential risk to their information, cybersecurity issues require a certain amount of secrecy until they have been properly addressed. Compromising, or even identifying and reporting on a vulnerability before it's been patched in an industry standard security product, process or vendor practice could cause a potentially catastrophic chain reaction for cyber insurers and their clients.

Culture Eats Strategy for Breakfast

Where the Cyber Catalyst program seems to potentially miss the mark is by overlooking the weakest link in any company's security (i.e., its users). An advanced cybersecurity system or set of tools capable of blocking the most insidious and sophisticated attack can readily be circumvented by a spear phishing campaign, a compromised smartphone, or a disgruntled employee. Social engineering cannot be systematically addressed. Combatting the lures of compromise requires organizations to foster and maintain a culture of privacy and security.

The risk of employee over-reliance on tools and systems at the expense of training, awareness, and a company culture where cybersecurity is front and center must not be underestimated. While it is easier to opt for the quick and easy approach of purchasing a recommended solution, companies still need a comprehensive and evolving playbook to meet the ever-changing tactics of persistent, sophisticated and creative hackers.

While industry-wide cooperation may be a good thing, it's vital for companies and insurers alike to recognize that any security program or service is fallible. Without an equal investment in functional cybersecurity, which places as much store in training employees and keeping aware of new threats, the rise in breaches and compromises will continue.

Published on: Apr 4, 2019