Advisen Ltd. surveys show that businesses are starting to treat cyber liability insurance more as a necessity and less as a luxury as existing clients increase their coverage limits and bigger numbers of customers enter the market.
Zurich North America and Advisen conducted a global survey of insurance buyers and risk managers and report that the take-up rate for cyber insurance is still climbing, with 78% of respondents having bought cyber liability coverage. More than 50% of respondents had bought stand-alone policies, versus 34% who had purchased any type of cyber coverage in 2011, the first year that the annual survey was conducted.
According to Zurich North America’s head of professional liability and cyber, Michelle Chia, clients have been happy with the coverage as more claims start to be processed. Chia said in an interview that satisfaction with the response of carriers to breaches and other cyber events was high and steady.
Chia added that as cyber threats and the associated liability has moved to the top of risk management strategies in many organizations, more than 80% of respondents indicated that they didn’t reduce their cyber risk spend during the COVID-19 crises, despite economic difficulties. Most companies who made changes to their cyber risk budgets in fact increased these and are looking for more insurance.
This may be due to clients understanding that the unexpected increase in working remotely will likely increase their vulnerability to cyber compromises or breaches.
Threat Visibility on the Increase
Advisen conducted another survey with PartnerRe Ltd. among brokers and underwriters globally, and this indicates that insurance buyers are increasingly becoming aware of cyber threats. News of losses and breaches, as well as cyber-related losses in their own organization, are the main reasons cited by companies for purchasing cyber liability. Over the last two years, the number of organizations brought to a standstill by ransomware attacks has increased dramatically, as has the dollar demands by attackers. This exposure has now risen to the second spot in the coverage demand area for both existing and new customers.
According to survey respondents, senior management and company boards are increasingly driving the initiative for online exposure insurance cover.
Responses to these surveys indicate market sentiment is moving toward tighter terms and conditions, and higher prices after years of slight losses that resulted in underwriters expanding coverage for premiums that were relatively low. Besides the complexity of coverage and risk that is still turning away many potential insurance buyers, price is still one of the major barriers preventing the close of a cyber policy sale. In spite of demand that is robust, these trends seem to be at odds for growth.
According to Jack Kudale, the CEO of Cowbell Cyber Inc., that creates opportunities for smaller insurance companies with agility enabled by technology. Cowbell in 2020 started selling policies using its own cyber risk assessment brand that gauges vulnerability continuously. Kudale said in an interview that clients are able to better appreciate and understand what they’re buying when digital risk is addressed holistically.
He added that to overcome that price barrier challenge, it was crucial to bundle the cyber insurance policy with the risk that is seen. 50% of the companies in the small market Cowbell sells to are new buyers of cyber insurance.
According to Chia, Zurich North America’s market approach is similar, and they offer their service as a collaborator in strategic risk management. Her companies do this by partnering with vendors who train employees to mitigate risk and help monitor exposure.
Chia added that this was the key of how they wanted to help protect companies when they manage their cyber risk.