Brokers and insurers will have to make sure they are alive to the challenges and opportunities in a growing market
Cyber insurance has been an emerging product for many years now, but data from insurance data and research company Advisen shows that it may be starting to break through into the mainstream market.
The popularity of cyber insurance globally has increased five-fold since 2006 (see chart, below), according to the Advisen Buyer Penetration Index.
This index, set at a base level of 100 in 2006, has now risen to 500 for 2013 and represents the growing popularity of cyber insurance products.
The Advisen ADVx index also reveals that the average price of cyber insurance has fallen by 6.7% since reaching its peak in March 2009.
Advisen executive vice president, information and analytics division Jim Blinn said this represented a significant change in fortunes for cyber insurance over the past eight years.
“Purchasing of cyber [insurance] has grown significantly since 2006,” he said. “The good news is more people are buying, the bad news is they are not paying as much. Or maybe that’s a good thing, and part of the reason the market is growing.”
And popularity of the product is much higher in larger companies, with more than one-quarter of companies with revenues more than £3bn purchasing a cyber product compared to less than 4% of companies with turnover under £1.5m.
Hitting the boardroom
A survey run by the insurance data and research company in association with Zurich also revealed that more than three-quarters (76%) of companies viewed cyber risk as either serious or extremely serious (see chart, below), up 19 percentage points from the previous year.
Furthermore, 76% of board members said they viewed cyber risks as a significant threat, up 23 percentage points from when the survey was run the previous year.
Zurich head of risk information and business continuity Jeremy Smith said it was a good sign that cyber risks were getting more exposure in the boardroom.
“The board is now becoming much more aware of cyber risk,” he said. “That is a major breakthrough. Risk managers are speaking to the board and it looks like the penny is finally dropping and the board are now engaging more with cyber risk and providing levels of investment where appropriate.”
Brokers and insurers must do more
But speakers at the Advisen Cyber Risk Insights Conference in London said there was still more to do in the UK before the product would finally be regarded as a mainstream product.
Marks and Spencer assistant insurance manager Lisa Meredith said there was a lack of understanding around cyber products.
“Having gone through the process [of buying cyber insurance], there is still a real lack of understanding both on the buyer side and in the market about what the policies are actually going to do,” she said. “Confusion between what the buyer thinks it’s going to do, and what the insurer thinks it’s going to do has the potential to be a real issue.
“Insurers and brokers need to do more to help risk managers and insurance buyers understand the risk, quantify the risk and understand the impact.”
So as cyber insurance starts to emerge from the fringes of the insurance world, insurers and brokers must make sure they are alive to the opportunities it brings.
If they miss out on the emergence of cyber insurance into the mainstream they will be losing out on the benefits of a big product in an increasingly digital world.
StrategicRISK’s sister publication, Insurance Times, has published a report on Cyber Insurance, reviewing the market, its players and their products.
Click here for more information