Blog: What impact would Cameron's encryption ‘ban' have on the insurance industry?
In light of the recent events in Paris, one of the biggest stories following the tragedy has been the response from the UK government on measures to help prevent any future attacks on the UK regarding the surveillance of electronic communications.
Pledging to ban any form of encrypted communication that the government cannot access, Prime Minister David Cameron has effectively promised that any encrypted software or apps, from messaging service WhatsApp through to online banking, will have to allow government access when requested.
To put it simply, this means all software creators responsible for encrypted programmes and apps will have to introduce back doors which allow the government to snoop whenever they feel there is a need. Yet the huge problem with this is that you cannot create such holes in software and only expect governments to access it - it provides access for the many hackers and criminal enterprises out there.
So what does this mean for brokers and underwriters providing cyber insurance policies? For starters, brokers involved in providing cyber policies to businesses need to consider what any changes in legislation may mean for their client, and communicate it clearly. Many cyber policies require encryption to be in place for coverage to be granted, therefore any change in encryption legislation can have serious repercussions for those involved in placing cyber insurance policies.
With this proposed legislation in place, businesses would also need to carry out extensive education of staff, to prevent downloading of software that falls outside of UK government legislation parameters. It would also mean that businesses which need to meet regulations would also have to adapt their security policies and cyber insurance strategy in order to meet whatever new standards the regulatory bodies set to adhere to government rules.
Therefore it is clear that this proposed legislation not only threatens to harm the general business landscape in the UK, but also the cyber insurance industry. A world without encryption means businesses would increasingly be exposed to threats online, and whilst this is bad for them, it also means many businesses would become uninsurable, as underwriters become reluctant to write risks as threats - and claims - increase.
Insurers can be sure the number of claims resulting from data breaches and attacks will increase, putting the growing cyber insurance market at risk. For a class of business which has only recently established itself in the general insurance landscape, to adapt to any new legislation would be a huge task.
Neil Gurnhil, Head of European Cyber Risk & Technology Insurance Safeonline LLP
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