The cyber insurance business is booming thanks to high profile hacks and more industries facing digital exposure - and now the policy itself is being sold more as a standalone than as part of a package.
To capitalize, brokers should know that cyber coverage volume is growing in non-traditional areas according to Kyle Gray, the director of underwriting at the MGA,
Ridge Canada Cyber Solutions.
“It’s not only required for very large companies and it’s not only required for technology companies. Many different sizes of companies in many different industries can have exposure to cyber,” Gray said, adding that some lines of business have more uptake than others.
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“Certainly in Canada, healthcare (has more uptake) due to their notification requirements. But definitely there are some changing industries that are new and starting to buy the coverage due to the evolving cyber exposure with the internet of things… as well as automation across a lot of industries like manufacturing where traditionally you wouldn’t think a cyber issue would be there.”
However, cyber insurance isn’t a commoditized policy and comes in a diverse array of shapes and sizes and an A.M. Best report has found 68% of insurers are moving towards standalone policies rather than ones built into home or commercial policies.
“Some people may not have the breadth of exposure for a full policy,” Gray said. “But I think the trend towards a standalone policy makes sense as the cyber exposure widens or ends up fleshing itself out - where previously it was, and still is, a very new exposure, an endorsement or extension may have made sense.
“There’s a lot more knowledge in the insurance industry and the legal industry in terms of what coverage needs to be in there. I think that a tailored, standalone policy provides a lot more clarity in the coverage than some extensions to a non-cyber policy would.”
The move towards standalone is also driven by insurers facing litigation over confusing cyber policies with low limits. Pricing and capacity is part of cyber’s evolution and both a Fitch and A.M. Best study said selling cyber as a standalone policy rather than piggybacking it on other policies contributed to better pricing of the cyber risk.
“It’s always hard to determine what the right price is, especially with a new, emerging insurance product,” Gray noted. “I think they (Fitch and A.M. Best) may be referring to some of the variability of the pricing in the market where it’s not necessarily consistent across all carriers but that can also be attributed to the fact that it’s not commoditized like other products. So there could be significant differences between the insuring products that could be part of the pricing.”
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