The COVID-19 pandemic has dramatically affected the insurance industry. Most analysts agree we are in a hard market. And in many ways, cyber insurance was the most impacted line of coverage.
Understanding the Current Market
Before COVID-19, most businesses and industries never allowed their employees to work remotely. But once the pandemic hit, many were forced to do so with limited time and resources — often without proper security measures.
According to the 2021 HP Wolf Security Blurred Lines & Blindspots Report, changing work styles and behaviors during the pandemic have created new vulnerabilities for companies. 88% of IT Decision Makers (ITDMs) report concerns about rising cyber risks due to employees using personal devices that were not built with business security in mind. Likewise, 54% ITDMs report an increase in phishing and a 56% note an increase in web browser related infections, among other types of breaches.
Over time, companies have learned to adapt their security measures for remote and hybrid employees. However, cybercriminals are adapting faster, as evidenced by the cyber insurance claims explosion.
One major factor is internal users and employees are no longer based in one secure location. Companies must rely on their employees’ home internet security settings and didn’t upgrade their IT infrastructure capabilities quickly enough. This led to increased ransomware attacks, long-tail business interruptions, and more expensive replacement costs.
Cyber insurance rates have dramatically increased with higher frequency losses and increased claim exposure. At this point, almost every insurance carrier has severely tightened their underwriting guidelines for both new and renewal cyber applications. Most cyber losses are hard to determine, measure and typically have high exposure. As a result, some insurers may consider cyber a non-insurable risk despite the increased demand from agents and brokers.
Regardless of industry, when demand increases and supply decreases, prices increase.
Insurtech Paves a Way Forward
Insurance agents and brokers trying to sell cyber insurance are like real estate agents in today’s economy. Both represent their customer trying to obtain a highly sought-out product. Due to the limited options, agents, brokers, and customers often accept an unfavorable contract just to get the product.
A potential homebuyer, for example, may waive inspections and cover more fees. On the other hand, for a new cyber insurance policy, applicants may need to accept lower limits, higher deductibles, and more exclusions for a higher premium.
While the real estate market will hopefully reach equilibrium soon, the cyber insurance industry doesn’t show any sign of slowing down. Brokers are only capable of binding policies with their appointed carriers. Agents have their hands tied, especially if the carriers they represent have increased their underwriting parameters. This creates a gap for new applicants with no idea where to go.
The best way agents and brokers can address a hard cyber market is by utilizing insurtech during the application process. A portmanteau of “insurance” and “technology,” insurtech refers to digital tools designed to improve the efficiency of the insurance industry.
The Relay platform, for example, leverages instant (API) quoting to help agents and brokers pull multiple quotes quickly. 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.
Not only do these tools enable brokers and agents to write business 90% faster than they could via manual processes, but it also allows them to go to multiple markets at once, thereby increasing efficiency. Further, by accelerating and optimizing quote submissions, brokers can more efficiently navigate cyber capacity limits from carriers, ultimately giving clients more options.
As the cyber insurance industry evolves, brokers and agents need to consider using insurtech to match applicants. The time and expertise required to match an applicant to the proper insurer at an acceptable premium is an exhaustive process.
If insurtech is used in the underwriting, loss control, and claims process, then it only makes sense to use the same tool to find and bind policies for a line of coverage fully immersed in technology.
Schedule your demo of Relay Platform today to see firsthand how insurtech helps agents and brokers adapt to a hard cyber market.