A lack of understanding, and even a confusion surrounding cyber insurance products, is a central challenge for the industry, according to Inga Beale.
“The problem is that I think there’s a slight disconnect between clients and their understanding of what’s on offer, and perhaps even a lack of understanding within the insurance sector,” Beale said while speaking at CFC Underwriting’s Cyber Symposium event in London last Thursday.
As cyber risks increase, the Lloyds CEO questioned whether all elements of the industry are “talking the same language” when it comes to the products on offer, and how that can be converted into something that clients “actually get excited about and want to buy.”
Pointing to the rise in businesses which own no physical infrastructure, such as streaming giant Netflix and home-sharing platform Airbnb, she said that there has been a huge rise in man-made risks in recent years.
Hacking is now a “global criminal enterprise and often state-sanctioned terrorism”, and is a threat which is growing – recent research suggests the costs of cyber-crime could hit $2 trillion by 2019, Beale said.
“When we look at the costs it’s quite difficult sometimes to assess and to think about what those costs may be, because the risk is changing so rapidly,” she explained, adding that additional costs such as litigation, and implementing system updates, are still being properly assessed by the industry as it continues to gather more data.
As well as working towards a shared understanding of the risks of cyber, the industry needs to take a more customer-focused approach to the coverage that is being offered.
“We are really good as an industry at segmenting everything the way we like it to be segmented – whether it’s by class of business, whether it’s by size of client… I think we’ve got to do a better job at looking at everything from the clients’ perspective,” Beale explained.
Working with risk managers to help businesses understand what coverage they can actually purchase is crucial, and brokers in particular play a key part in this, she said.
Beale explained that the process of buying cyber insurance needs to be simplified, and the certainty of protection offered to clients increased, if the industry is to build trust with the business community.
She added: “When anything new comes along like this, the last thing we should be doing is saying we can’t take this on, because if we do that we are not building trust with our clients and they’re going to be asking us more and more what our purpose is.”
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