Cyber insurance is here to stay. For independent agencies still reluctant to embrace cyber offerings, there's not much choice left. The product reaches into nearly every sector of the economy and is fast becoming a viable commercial insurance product.
In 2015, nearly $1 billion in cyber insurance premiums was reported to regulators. On top of that, global estimates top out at nearly $3 billion in premiums per year. Most experts agree coverage will continue to grow.
Lloyd's of London found that over 92% of businesses in the European Union had experienced a data breach within the last five years. The demand for cyber coverage is here to stay.
What is Cyber Insurance?
Cyber insurance is simply a policy created to protect a business's liability if a data breach were to occur. Common forms of cyber attacks include stealing credit card or social security numbers.
There are a number of different types of cyber insurance, which are often available separately under a single policy. These include:
- Security Events Cost: This coverage refers to the cost of hiring a breach coach to advise on regulatory requirements when notifying people about a breach that affected them.
- Business Interruption: This coverage protects a business from a non-physical loss due to a cyber attack. The attack can occur at an insured site or a dependent location.
- Loss of Digital Assets: This coverage ensures recovering and recreating data that has been lost or destroyed is covered.
- Cyber Means: If a theft was perpetrated in a cyber manner than this coverage protects your business from it. Examples could be schemes where thieves impersonate email styles to trick staff into providing data or transferring funds.
- Liability for Losses: Coverage for individuals who suffered medical, financial and other hardships due to personal information being stolen.
- Electronic Media Liability: This coverage ensures a company will be protected from personal injury from intellectual property rights claims by producers of content.
- Regulatory Coverage: Helps cover the costs for fines, penalties, and investigations in the event of a cyber security event.
Understanding Limits and Sub-Limits
As cyber insurance coverage is continually changing, it can be difficult to keep up with everything. Even some great brokers struggle to keep up with all the changes in the marketplace.
Due to the various types of cyber insurance coverage, the complexities stem from the structural differences in policies. Many insured are startled to find out the relationship between sub-limits and limits within their policies.
One important focus for cyber policies is whether a policy requires insured to pay a claimant before being reimbursed or if the policy pays on the insured behalf. This can change depending on the type of coverage within the same policy.
Cyber insurance is becoming increasingly competitive. Most in the industry view cyber policies as a new growth segment, especially for certain specialty markets. Due to the competitive nature of said coverage, pricing tends to be sticking points for decision makers.
Brokers and agents must focus on the quality of cyber coverage and service – over price. Cyber policies are purchased for their ability to help a company respond to a cyber crisis.
As such, finding a cyber vendor who offers high quality consultants and breach vendors can be paramount. Legal staff, forensic services, network security, and more should be considered, too.
Cyber in the Future
Cyber insurance is here to stay. The growth is there, along with the need. As such, underwriters are beginning to make moves towards standardization. With language standardized, a simplification of the complicated application process could be forthcoming.
While the need is there, many companies still do not see cyber coverage as mandatory. If more companies begin to make cyber protection a priority, then this market could explode in the coming years.
For more information about cyber insurance contact Skyline Risk Management, Inc. at (718) 267-6600.