Introduction: In an ever-evolving digital landscape, cyber insurance emerges as the “emergency service” for victims of cyber incidents. However, despite its significance, the cyber insurance market faces a demand-side challenge. James Burns, head of cyber strategy at CFC, sheds light on the need for greater education and awareness regarding cyber risk implications, especially among UK SMEs, which constitute 99% of businesses in the country. This article explores the importance of bridging the cyber protection gap and emphasizes the role of insurance businesses in promoting cyber insurance.
The Evolution of Cyber Insurance Market: Over the past decade, cyber insurers have diligently focused on growing the market and emphasizing the value of cyber insurance. However, the market landscape started to change in 2020, driven by a deteriorating threat environment and soaring loss ratios. Insurers shifted their attention to rate corrections, leading to increased prices for cyber insurance policies. As a result, brokers faced challenges in explaining these price hikes to their clients, and potential buyers were deterred by the perceived volatility of the product line.
The Intangible Nature of Cyber Risk: One of the key challenges faced by insurance brokers is the intangible nature of cyber risk. Cyber incidents may be difficult to comprehend until experienced firsthand. Burns highlights that once brokers support a client through a cyber incident, they gain a better understanding of cyber insurance and its benefits. To bridge this knowledge gap, brokers should collaborate with insurance providers and seek claims case studies, which can help them contextualize cyber insurance for their clients.
Empowering Brokers and Underwriters: The responsibility of education and awareness does not solely fall on brokers. Insurance providers and underwriters also play a crucial role in actively engaging with brokers and disseminating timely insights about cyber insurance. Burns urges underwriters to be proactive in sharing relevant information and supporting brokers with the necessary educational materials. By instilling confidence in the stability and value of cyber insurance, brokers can better educate their clients about their specific cyber risk profiles.
The Collaborative Approach: Burns emphasizes that cyber insurance should not be seen as a substitute for investing in security controls. Instead, it should complement existing security measures to provide comprehensive protection. Brokers and insurance companies should work together to ensure that clients are adequately safeguarded against cyber threats. A united front in promoting cyber insurance will help grow the market organically, thereby benefiting all stakeholders.
Conclusion: Cyber insurance stands as a vital safeguard in the face of the escalating cyber threat landscape. While the demand-side challenges persist, the solution lies in greater education and awareness. Brokers, insurers, and underwriters must collaborate to instill confidence in cyber insurance as a stable and indispensable product. By working together, they can empower businesses to protect themselves effectively in the digital era.
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