As technology advances, so does the need for cybersecurity. Most companies utilize risk transfer to decrease their cyber risk exposures, thus creating the market for cyber insurance.
In recent years, this emerging line of business has gained prominence in the collective consciousness like never before — primarily due to high-profile geopolitical claims. In this blog, we’ll dive into the current state of the cyber market and then explore how insurtech platforms like Relay can help agents and brokers adapt in uncertain times.
Why Is Cyber on Everyone’s Minds?
Typically, insurance claims only become mainstream news when associated with tragedy. However, cyber insurance claims are the opposite; the attack itself often creates tragedy.
In the United States, the 2020 SolarWinds hack crippled and exposed the weak security measures used by many companies. Then in 2021, the Colonial Pipeline attack caused fuel shortages affecting millions of Americans across the East Coast.
Such attacks are not exclusive to the United States. The world’s largest meatpacking company JBS experienced attacks in Australia, Canada, and the United States. JBS paid over $11 million in ransom to end the ransomware attack and prevent a possible food meat shortage.
The mainstream media only reports on major attacks against infrastructure, financial institutions, and government agencies, typically organized by international cybercriminals. However, small businesses are just as likely to experience a cyber attack because they lack the resources to prevent phishing and malware. And these attacks are more prone to be done domestically.
What Does This Mean for Insurance?
Because of the close attention and exposure to cybercrimes, insurers and reinsurers have a multifaceted dilemma growing at unforeseen speeds. Historical data is hard to obtain because the nature of the threats keeps changing. But the issue isn’t strictly insurers being too cautious.
Government involvement is required to share information across all industries and improve cybersecurity. Ransomware, for instance, often comes from international sources. Only government entities can disrupt ransomware groups and establish a streamlined risk management framework. And since these losses are international, different countries need to work together, as evidenced by initiatives like Solvency II. Simply put, insurers need more government involvement to manage cyber threats properly by minimizing loss exposure and increasing loss prevention.
The information, resources, and options used in 2020 have largely become outdated for brokers and agents. Insurance carriers have increased premiums, severely tightened their underwriting guidelines, and decreased coverage options. Even Swiss Re’s Chief Executive Officer Christian Mumenthaler calls the cyber issue “so big it’s not insurable.”
How the Relay Insurtech Platform Can Help
Brokers and agents who don’t use technology to find and bind cyber policies are doing a disservice to their customers.
To keep up with the complexity and speed of rapid change, brokers and agents need to utilize technology to educate their customers. Verbally advising a customer on the complexity of cyber insurance rates is one thing. Still, brokers and agents also need to provide detailed information on the current landscape in a digital format. Brokers will encounter less customer resistance and build better relationships with information transparency.
Insurance professionals must provide customers with evidence of how the market is changing. Some insurers will only want to insure specific industries. Some will only insure based on the customers’ loss history and the strength of their risk management framework.
By educating the insured — and staying informed themselves — brokers and agents learn more about their customers' needs. For example, the insured may recognize overlooked areas within their risk management processes or uncover a new avenue for the broker and agent to explore through an endorsement or new policy.
Relay understands that cyber education is critical in equipping agents with the right tools to inform their customers. We believe we bring value in assisting your brokers and clients in making informed decisions and enabling creative ways for your firm to stand out from the rest of the pack.
The Relay Risk Academy (powered by NetDiligence) features educational modules that help agents and brokers lead more productive customer conversations, create dynamic proposals that align with industry-leading analytics, and reflect the entire risk management product inclusive of value-add services.
Of course, we also can’t forget about the capacity problem.
Relay helps brokers and agents secure capacity in a hard cyber market through a comprehensive suite of features.
First, our instant (API) quotes help agents and brokers rapidly pull multiple quotes. Rates can then be compared quickly via a user-friendly Competitive Differentiation Table™ and exported into a dynamic Smart Customer Proposal™ that aligns with the agency’s branding and voice.
Together, these tools enable brokers and agents to write business up to 90% faster than they could via manual processes. By increasing speed and efficiency, Relay helps insurance professionals navigate cyber capacity limits from carriers, ultimately giving their customers more options. We also empower agents and brokers to go to multiple markets at once.
Less capacity means a smaller book of business. Brokers and agents need to use insurtech platforms like Relay to adapt to a hard market to keep up with the increasing demand for cyber insurance.