Lack of understanding prevents cyber insurance purchase, says study

The most significant factor preventing companies to purchase cyber insurance is that firms do not understand their own risk exposures, according to a new study of the UK cyber risk insurance and broker community.

Responses of the survey also suggested that companies do not understand policy coverage and that cyber policies were still too confusing and did not tie easily to known cyber peril categories.

The study also suggested that the insurance industry needs to address non-affirmative cyber more decisively. More than three-quarters (77 percent) of UK cyber risk insurance brokers and insurers believe that the insurance industry needs to urgently address non-affirmative cyber or ‘silent cyber’ in a deeper, more meaningful way. Silent cyber refers to instances where cyber perils (such as service interruption or data breach) are neither explicitly included, nor explicitly excluded, by an insurance policy’s wording.

In addition, measurement of cyber risk in financial terms is highly deficient among insurance customers and the insurance industry itself, according to the study. Furthermore, a series of catastrophic cyber events or a systemic cyber event will drastically alter the way in which insurers measure the risk profile of each applicant, according to respondents.

The survey was sponsored by Secure Systems Innovation Corporation (SSIC), a cyber risk management firm that created X-Analytics, a cyber risk model that quantifies the economics of cyber risk.

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