How you're sabotaging your own cyber sales

Cyber sales are growing, but you'll be hard-pressed to get in on the action if you're making this mistake.



Boston-based insurer Liberty Mutual began offering cyber insurance policies in 2011. Just three years later, business is booming. In fact, sales of Liberty Mutual cyber policies jumped 30% just last year, according to a Boston Globe report.

“It’s a huge growth potential,” said Oliver Brew, vice president of privacy and technology underwriting with the insurer. “It’s an emerging risk.”

Brew pointed to an increase in extensive, high-profile data breaches like the December hack that plagued Target shoppers as a key driver behind booming sales. Despite the increase in awareness and sales, however, there are still a number of misconceptions preventing producers from truly capitalizing on the trend.

Sometimes, it’s even producers themselves getting in the way.

Case in point: a recent report from Chubb Corp. suggests that while 28% of private companies surveyed currently held cyber insurance, a full 65% believe the risk is insured under their GL policy. That could have something to do with how producers discuss GL and cyber coverage with their clients, Innovation Insurance Group President Ty Sagalow believes.

“The number of companies that still believe cyber is covered under their general liability policy is dramatically high, and there’s just very, very little to support that proposition,” Sagalow said. “I think that brokers need to find ways to better explain that cover is afforded for this risk separately—not through a GL policy.”

“Those numbers are very, very consistent with what I’ve run across for many, many years,” Sagalow said. “You’d hope it would get better.”

Another common misconception among both producers and their clients is the risk of data breaches relative to the size of the organization.

“What surprises me is that the news reel of data breaches has been playing for so many years,” Sagalow said. “I think people are slowly realizing that it’s not just a risk for major firms, but it’s not at the speed we would have hoped.”

In reality, the most common data losses actually involve fewer than 100,000 customer records, a recent Ponemon Institute report points out. And these smaller breaches are just as damaging, with an average $5.4mn lost due to data theft in 2012.

Cyber insurance is also often difficult for producers to wrap their heads around. As cyber risks evolve, insurance policies are often a moving target—something that may intimidate main street agencies.

However, ignoring the coverage deprives producers of an important revenue source going forward, says Christine Marciano, president of the independent cyber insurance agency Cyber Data-Risk Partners.

“A lot of brokers still don’t understand the product, and the broker mentality is if they don’t understand the product, they won’t talk about it with their client,” Marciano said. “They should start looking at the product, taking a look at the coverages that are offered, and bringing the topic into conversation with their clients.

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