The issues with selling a cyber policy outside Europe and the US

The issues with selling a cyber policy outside Europe and the US | Insurance Business

The issues with selling a cyber policy outside Europe and the US

Cybersecurity was raised as top priority for global businesses in Allianz’s 2019 Risk Barometer, with Corporate & Speciality Pacific CEO Willem Van Wyk commenting that a large chunk of businesses saw it as a “significant concern.”

When it comes to underwriting cyber risks, insurers are constantly kept on their toes by a rapidly changing landscape and the emergence of new risks almost every day. According to chief underwriting officer at Allianz Partners, Eftim Stojanov, assessing cyber risks is made tougher by the need to assess each individual as a standalone case – and selling these policies will require brokers to really emphasise their value, especially in markets where businesses may not perceive a significant threat.

“In the past, we ourselves looked at offering products focused on digital risk cover – this includes things like data protection, cyberbullying, hacking and dark web activities, among others,” Stojanov told Insurance Business.

“These haven’t yet been well assessed by the insurance sector in general. There have been some studies done by reinsurers such as Swiss Re, but we are still on very uncertain ground when it comes to underwriting a lot of emerging cyber risks.

“This is still largely the game of larger carriers who are writing low frequency, high severity risks – your typical corporate insurers,” he explained. “They’re looking to protect large corporations from the many potential consequences of an attack. Our own underwriting appetite is different, in that we underwrite high frequency, low severity risks that are easily predictable through previous history, and this is likely to be the case for most smaller underwriters. Often there is limited scope to delve into cyber risks, because you need to assess that through each individual’s unique situation.”

Stojanov says that cyber policies are easier to sell in markets abroad such as Europe and the US, where businesses have felt the impact of being uninsured, and where the risk may potentially exist on a much larger scale. He says insurers will need to carefully tailor their policies to suit the needs of their target markets, and to work with advisers to understand client risk portfolios.

“In Europe, you can sell the cyber risk offering far more easily, and convince businesses that it provides a proper benefit,” he stated. “In a market like New Zealand, businesses are slightly more reluctant to accept these benefits immediately, because they don’t see it as an essential product.

“In this respect, insurers will need to look carefully at updating policy wordings to ensure that they are servicing customer needs while also protecting their business.”