Are cyber policies overly-convoluted?

Insurance Business’s most recent Brokers on Underwriters survey saw brokers cast their votes on which agencies currently provide the best offering across a wide range of categories – from property and product liability to construction and strata.

For underwriters in the cyber space, brokers pointed to Emergence Insurance as the front-runner, with the firm stepping up from the second-place spot it secured in 2017. When asked why Emergence was outperforming its competitors, brokers identified a range of factors – including the agency’s broad cover, expert knowledge, and ability to make cyber easy-to-understand for both brokers and insureds.

Looking at broker responses in the survey, this straight-forward and easy-to-understand element is something that’s considered crucially important but is still missing from many current cyber policies.

Gerry Power, founder and national head of cyber sales for Emergence, believes this gap remains common in the marketplace and is exactly why the agency was established in the first place.

“When you look at why Emergence was created and how it developed it’s offering, it was based on research from the broker market to find out what was available to them and if it was working for their clients,” says Power.

“The message was clear that, in their view, sometimes cyber policies are more complicated than they need to be with things like convoluted wordings or cover provided in one section then taken away in another,” he says. “They wanted something that even their clients could read and understand but that wasn’t available in the market.”

Power isn’t the only figure in the cyber space who has criticisms about the quality of coverage on offer to Australian SMEs.

Philippa Davis is an international cyber underwriter, specialising in the Australian market, for CFC Underwriting – she says she’s observed a worrying trend within the cyber insurance space.

“Feedback we’ve had from our broker partners suggests there are a lot of warranties in policies at the moment where the client has to have the best of the best IT system or must have a call-back system in place when transferring funds,” she tells Insurance Business.

“Going into 2019, we would like to think that those warranties and exclusionary language would become less common, along with overly complicated language in policy wordings.”

However, while both Power and Davis are pushing for cyber policies which are easier to understand for all involved, it’s not always as simple as changing the wording or updating exemptions – increased education for brokers and clients is equally important.

“We’re on a mission to educate brokers and make it easier for them to provide the cover that their clients need,” Power tells Insurance Business. “We’re also looking at educating the end customer and opening their eyes to the fact that cyber is one of the biggest risks facing their business.”

Davis agrees that the education component is crucial for underwriters in the cyber space.

“A lot of the work we do here is trying to help and educate, using our claims data to make sure our broker partners are really comfortable with the policy and the coverage we’re offering as well as the service we provide,” she says.

“Cyber is confusing and it’s constantly evolving, we completely get that, so we spend a lot of our time on the education piece because knowledge is power and we want to make sure brokers feel comfortable when they’re selling our policies.”