On July 19, 2024, leading cybersecurity vendor CrowdStrike released a software update, just like many enterprise software vendors do every day. However, things went haywire when the updated version of its software turned out to be faulty. Within hours, widespread problems started with the Microsoft operating system, one of business’s most ubiquitous software platforms. The faulty upgrade quickly impacted IT systems globally, causing outages and downed systems across every industry. International news outlets and social media were full of stories of grounded planes, shuttered businesses, and stopped markets. This software glitch has cost Fortune 500 companies approximately $5.4 billion in damages to date, according to insurance company Parametrix.
The days-long disruption sparked an influx of cyber and business interruption insurance claims and litigation by businesses impacted by the debacle. Last week, Delta Airlines announced that it is seeking legal action against CrowdStrike and Microsoft after the outage, which resulted in the cancellation of more than 7,000 Delta flights. The airline claims that the outage caused a direct revenue hit of $380 million due to refunds to customers for canceled flights and compensation in cash and frequent flyer miles.
There is an ongoing debate about whether this is a matter of Cyber, Business Interruption, or another line of coverage. Some experts say it’s a bit of both. Since the outage began with a botched software update and not a cyberattack, the non-malicious nature of the incident may limit the scope of coverage.
One thing is for sure. In this increasingly interconnected world of global business systems, where software ecosystems are dependent on various vendors playing well together, it’s more important than ever for insurance organizations to be better prepared for the next incident. Because there will be more to come in the future.
Taking Stock of Your Current Technology Systems
Insurance organizations fortunate enough to escape this incident unscathed should use the Crowdstrike outage as a teachable moment. This is the perfect opportunity to assess your front, middle, and back office systems and ensure they’re up for the task if a global incident like this happens again.
For example, are you ready to scale up your front office interface and effectively support a wave of customer calls after a large-scale incident? As an agent or broker, are you prepared to communicate quickly and efficiently with your customers about the impact of such an outage? Can you provide a dedicated, secure customer portal or send text messages with claim status updates? Can your entire team access policies in force and actual coverage when serving the business? You need an updated back-end system to respond effectively. And you don’t want to discover this in the middle of a large-scale event when your customers need you the most.
A connected front, middle, and back office utilizing modern technology will enable your organization to respond swiftly and accurately to a surge in claims following a national or international incident. Remember that your customers will likely have coverage questions and need to file and track claims easily. Secure customer portals can handle much of this process. A self-directed customer service portal is crucial for policyholders to check on the progress of their claims.
This is a genuine opportunity to support your clients, but your technology systems must be capable of supporting both your staff and your customers.
The time is now to make the necessary changes and upgrades to your insurance management system. Our research shows that 75% of insurance organizations worldwide are planning to significantly change their current technology systems by 2025. The smart, strategic insurance players will spend the rest of 2024 and the first half of 2025 investing in their technology systems and streamlining their operations. The players who procrastinate when it comes to upgrading their systems risk being left behind by their competitors.
Ready to talk to an expert about preparing your insurance management systems for whatever comes next? Get in touch with a Novidea expert today.