Cyber Insurance: An Exciting Potential Market for Agents to Explore in 2021
Companies are undoubtedly benefiting from technological breakthroughs and big data. Yet at the same time, these advancements are also keeping them on their toes. It takes only one cyber-attack to compromise a company’s entire data. But the worst is the lawsuits that follow, hurting the finances of the company and sometimes even bringing it down. Thankfully, there’s a way to cover losses brought about by such emerging cyber risks — Cyber Insurance, also known as Cyber Liability Insurance or Cyber Security Insurance.
Cyber Insurance has become a necessity in the information age. Since both personal and company data are vulnerable to data breaches, there is a greater need to protect companies from liabilities arising out of data loss or theft.
In this blog
What is Cyber Insurance?
Cyber insurance falls on the specialty insurance product line. It protects corporate companies, small businesses, and even individuals from risks introduced by information technologies.
Generally, the policy covers both the first-party and the third-party. Under first-party coverages, the insurers indemnify for direct expenses such as costs incurred in notifying the customers about the breach. The third-party coverage includes providing financial support to business owners in case of claims by customers or any companies that have been injured due to the event of data loss.
An article by Forbes (2021) states that the cyber insurance industry is worth $5 billion is likely to show an annual increament of 20-30% in the near future. The same article also predicts many, if not all, insurnace companies entering the market by 2025. Steady growth in this particular line of insurance suggests a potential market for you to tap.
Who Are Potential Cyber Insurance Customers?
Traditionally, only companies that stored or processed Personally Identifiable Information (PII) felt the need for this insurance. Understandably, keeping such data safe was (and still is) one of their highest priorities. However, that is not the case today. A growing number of companies understand the importance of the reliability and inter-connectivity of their systems. More importantly, they understand the responsibility of protecting the data of not only their customers, but also their employees, vendors, and stakeholders.
As a result, the potential market for cyber insurance has grown broader. Companies that possess data and are employing digital technologies are feeling the need for this insurance. So there are plenty of fish out there for you to sell to.
Strategies to Sell Cyber Insurance
Understand the Scale of the Business
Insurers offer Cyber Liability Insurance as a stand-alone policy or package it with other business policies. Compared to large firms, small and medium-sized enterprises are more likely to purchase a packaged policy. The reason for this is the tight budget of the SMEs. However, insurers are beginning to exclude cyber protection from such business insurance packages and instead are offering it as a separate policy.
Personalize the Cyber Insurance Policy
The needs of cyber liability insurance can differ depending on your customers. Some may want heavy coverages due to higher cyber risks and more significant tort liabilities, while others may want just a medium or limited coverage. The coverages are unique to the insurers and type of policies. Talk to your clients and understand their business needs.
Be Proactive in Analysis
Cyber insurance is still very young and many variables are unknown to the companies, as well as to the insurers. As the bridge between customers and insurers, take a proactive step in exploring the needs of your clients as well as understanding to what extent insurers can offer protection. Ask your clients questions regarding the risks they’ve identified and proactively analyze other potential threats that your customers are not aware of.
Choose Trusted Cyber Insurance Carriers
Cyber security insurance is growing, and it is going to have a significant demand as internet-based risks breed in our society. A young line of business means high chances of loopholes in insurance products or contracts. Consequently, be careful while selecting the carriers that you want to recommend to your customers. Look for carriers with proven records of underwriting cyber security insurance policies.
Prominent Challenges and Their Solutions
Although selling cyber liability insurance is a massive opportunity for independent agents, it comes with some challenges.
Pricing Uncertainties in Cyber Insurance
This line of business is young. Not many insurers have the right amount of experience in offering cyber policies. Estimating the severity of loss and underwriting the business interruptions caused by cyber risks remains challenging. Insurance costs can vary greatly.
Make sure to understand your customer’s scale of business, analyze the potential parties at risk, discuss the priorities of your clients and scan through the market to identify the insurers that provide the best possible solution. American International Group (AIG), Chubb Limited, Hiscox, Liberty Mutual, etc., are the top insurance carriers offering cyber insurance.
Underwriting Emerging Technologies
There are emerging cyber risks brought about by ever-evolving technologies. Smart technologies are a growing way of life today.
A great solution to staying updated on the emerging cyber risks posed by technologies is to engage yourself in a platform where these risks are identified and analyzed. For instance, consider signing up with an insurance aggregator. You’ll have more knowledge about what is trending in this particular line of insurance and the trending demands of cyber security insurance. As a result, you’ll find it easy to design just the right policies for your clients.
Evolving legal infrastructures for Cyber Insurance
Legal provisions and policies for cybersecurity keep changing on an as needed basis. It would be best to understand how the cybersecurity reforms fit in to control the emerging cyber risks.
According to National Conference of State Legislature(NCSL), at least 38 states have introduced over 280 resolutions to deal with cybersecurity in the US. The resolutions included addressing cybersecurity insurance, increasing penalties for computer crimes, regulating cybersecurity in the insurance industry, implementing training to improve incidence response, and pay special attention to specific cyber-crimes such as ransomware.
Cybersecurity poses one of the most considerable risks for any business. From a client perspective, the need for cyber insurance is clear and rapidly growing. Therefore, for an insurance agent like you, there’s a massive untapped market that you can prospect and boost sales.
While you explore this arena, remember that only understanding your clients’ needs will help little if you ignore the evolving landscape of cyber risks and threats. Pay close attention to the changing legal infrastructures. Once you are well-informed, you will find a hidden treasure in your existing market.
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