Canadian brokers are trying to keep up with an increased interest in cyber risk coverage.
Michael Loeters, vice president at BFL Canada Risk and Insurance Services Inc., says he is getting more questions lately about cyber and privacy risk management.
But even though executives are discussing the risk more often, this has not translated into more inquiries about cyber insurance.
This may be just as well, because Loeters believes Canadian brokers have more to learn about the cyber insurance products on the market.
“I find there is still generally a lack of awareness and understanding of cyber and privacy insurance coverage,” Loeters told Insurance Business. “I think that is because the brokerage community in Canada does not really understand it, nor feel comfortable talking about it with insureds.
Please see 'Educating brokers' on Page 2#pb#
Educating brokers
“It is a relatively new product that requires significant training to fully understand the coverage options and how to intelligently discuss these options with insureds.”
That education may be due sooner, rather than later. A recent study by American International group (AIG) in the United States, which included input from Canadian and U.S. insurance brokers, found that corporate executives were more are concerned about cyber threats than about other major business risks.
A Marsh Canada study says Canada still lags behind the U.S. market in cyber risk coverage. At the same time, “there has been a large increase in activity with many communications, media and technology organizations obtaining proposals and binding coverage for cyber risk coverage.”
More than 85% of the 258 decision-makers surveyed by AIG said they were very or somewhat concerned about cyber risks to their organizations. In comparison, 82% of executives were very or somewhat concerned about income loss, 80% were concerned about property damage, and 76% were worried about securities and investment risk.
Brokers and executives believe the financial damage caused by hackers or a privacy breach is a small part of the puzzle, AIG’s study says. “More than two out of three (69%) executives and brokers believe that the reputational risk from a cyber-attack is far greater to a company than the financial risk.”
Loeters said the broker’s value is to help clients get a handle on identifying and assigning numbers to various kinds of cyber risks.
“I find that most organizations have no idea what the true cost of a cyber or privacy breach could be on their organization,” Loeters said. “We should offer our clients risk financing options through the various cyber insurance products available, but we should also be helping them to manage the non-insurable portion of the risk such a reputational damage, employee morale, etc. which can be as large or larger than the insurable risk.”
“As brokers, one of the biggest areas of value we can bring to our insureds is to help them understand and quantify their risk in this area,” he said. “For example, generally organizations still think of this as an IT issue only, when really it is as much an employee understanding, training and awareness issue.”
