It’s no newsflash that cyber liability insurance is the premier product in the commercial insurance world. What is surprising, however, is how quickly it is expected to grow.
According to ABI Research, the market for cyber insurance is set to hit $10 billion by the year 2020. That’s just a fraction of the total global insurance market, but the growth rate is striking, driven largely by the increase in costs associated with cyber attacks and data breaches.
Simply put, it will soon become too costly for businesses to ignore, says ABI Research Director Michela Menting.
“More information sharing, and understanding of event impact and the associated longer-term costs (through post-incident analytics, for example)…will drive better policy rates and see the cyber insurance market progressively emerge from its niche, despite being around for over 30 years,” Menting said.
While this eventuality stands to give insurance agents quite a windfall, many are still having difficulty selling cyber liability policies – particularly to small businesses. According to recently released survey data from insurance broker The Graham Company, just a little more than half of senior business professionals have consulted with an insurance or risk management expert to review plans for mitigating cyber risk.
What’s more, ABI Research suggests that less than 20% of large companies have cyber insurance and less than 6% of small- to medium-sized businesses carry it.
The reasons business owners give for availing themselves of cyber insurance differ. While price may be a concern for small companies, about half of respondents in a KPMG survey said they had little confidence a cyber insurance policy would pay out when needed.
This should represent a clear call to agents, says John Tiene, who represents thousands of agents in the Northeastern US as CEO of
Agency Network Exchange (ANE).
“Our job is really to educate the business owner as to the variety of exposures they are presented with and help them understand how the coverage can protect them,” he said.
Most important is ensuring agents are sufficiently comfortable with the cyber product to discuss it with clients. Going forward, failure to discuss cyber protection could be a major E&O exposure for independents.
“This should now be a standard conversation with clients because every client has the exposure at some level. A breach may only cost a client $10,000 to $30,000, but for a small business client, that is a lot of money,” said Tiene. “They may turn to the agent and say, ‘Why didn’t you talk to me about this?”
