Is a soft cyber insurance market bad for consumers?

Is a soft cyber insurance market bad for consumers? | Insurance Business

Is a soft cyber insurance market bad for consumers?

Soft insurance markets tend to encourage cost-centric buyers. It’s a natural human tendency, driven by worldwide consumerization, to at least consider buying something at a cheaper price than an offer elsewhere.

Money has been a driving factor behind some insurance lines for a while, primarily personal products like auto and homeowners’ insurance coverages. But what happens when money starts to decide more complex insurance purchases, like cyber insurance? Is the consumer put at risk?

“With cyber insurance, you get what you pay for,” said Laura Burke, national practice leader and executive underwriter at Allianz Global Corporate and Specialty (AGCS). “It’s quite a soft market in the US at the moment. There’s lots of capacity and lots of variations in the coverages that are available. The amount of choice in the market has resulted in quite a lot of price-buyers.”

The US is widely regarded as the place to be for cyber insurance and security expertise. Its world-leading privacy regulations spurred on evolution of the US cyber market ahead of most other countries, which resulted in a relatively quick capacity boom and current soft market environment.

These days, cyber insurance shoppers can go online, get a quote, and buy a policy very quickly. Cost-centric speed buyers can sometimes have the unfortunate side effect of giving the market a bad reputation, according to Burke.

“Some companies approach cyber with the mindset that they have to get a policy in place to adhere to regulations, so they buy an inexpensive policy and then forget all about it. If a cyber incident later occurs, these firms then have a huge shock when the cheap policy they bought doesn’t respond in the way they would like it to. They criticize the product and spread the word that cyber insurance isn’t worth the money – so it sometimes gets a bad rep,” she explained.

A soft insurance market isn’t a bad insurance market, Burke stressed. Heightened competition forces insurers to up their game, and offer the best coverages they can and at competitive prices in order to win business. It’s positive for buyers, especially SMEs without huge purses to spend on insurance, for whom cyber coverage is becoming an increasingly important ‘business-saving’ product.

“The challenge for insurers is to be profitable while also providing good coverage and adequate protection for consumers,” Burke told Insurance Business. “At AGCS, we’re confident in our robust cyber insurance product. We try find good partners, offer the best underwriting we can, and we make sure our book is diversified so we’re in a strong position to react to market changes, while still offering a cyber product we believe in.”


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