Cyber insurance dynamic is ‘broker’s dream’
Despite the fact that a high percentage of senior decision makers in large companies are concerned about the threat of cyber attacks, a high proportion of businesses still fail to buy insurance coverage against this threat.
But that represents a “broker’s dream” according to, Ty Sagalow, president, Innovation Insurance Group. “A high risk area with a high level of concern but little purchase of insurance, that’s an insurance broker’s dream,” he said, referring to recent studies of uptake levels of this form of coverage.
A recent survey of public companies in the US by Chubb revealed that despite 63 per cent of senior decision makers being concerned about cyber attacks, 65 per cent of public companies do not buy cyber insurance. A separate report by QBE found that although 67 per cent of UK businesses have a plan in place should a cyber attack occur, 52 per cent have no coverage.
A different survey by Zurich of 152 organisations, suggested only 19 per cent of those surveyed have bought cyber insurance despite the fact that 76 per cent of companies survey expressed concern about their information security and privacy.
Since the first cyber insurance products were launched in 2000, estimates suggest the market is now worth more than $1 billion in premiums globally. Anecdotal evidence also suggests that the business is profitable with rates flat to down in contrast to the wider property-casualty market where rates are slightly increasing.
But the scale of the threat is growing rapidly. There were more than 26 million new strains of malware released into circulation in 2011, the last year with solid data on malware. And almost two-thirds of US firms report that they have been the victim of cyber-security incidents or information breaches.
Sagalow says he believes a big reason for low rates of uptake is a lack of education. Other surveyed have suggested that a high proportion of companies incorrectly believe that cyber is covered under their general corporate liability.
But he also believes this market is set to grow rapidly in the future – as long as carriers can ensure they wrote this risk for a profit.
