Cyber Insurance is Not Niche Anymore
We need to adjust to the new reality of cyber insurance being an integral part of Property & Casualty, and act accordingly.
Few insurance products are more emblematic of the 21st century than cyber insurance. Created to protect users from internet- and information technology-based risks, it was a new policy type that was slow to get off the ground.
According to Check Point Research, the number of cyberattacks grew year-on-year by more than a third (38%) in 2022. Today’s targets are some of the largest companies, as well as health and education providers. We can assume that consumers and SME businesses will be next. We can also assume that given the nature of these attacks, and the ransom demands that accompany them, that many attacks go unreported. This is due to embarrassment and the impact on a company’s brand and – if paying the ransom – the reputational risk of being perceived to fuel a criminal industry.
Looking across the ecosystem, businesses and consumers require constant education and support, and the market will continue to focus on prevention and mitigation. This is where insurers can contribute to security as part of cyber insurance products.
As an example of the latter, consider the Lloyd’s Market Association’s public move on exclusions and definitions. The four model clauses have as their intended effect the exclusion of war coverage from cyber insurance. These changes were made necessary by the challenges in defining perpetrators of cyberattacks as aggressive warlike actions by a state or similar actor, alongside an insurer’s requirement to exclude coverage for such. The general market is likely to follow suit with an established and recognised framework that communicates coverage and exclusions, making it easier for the insurance buyer to understand them and the products’ value.
One of the central challenges with cyber insurance is predicting the potential amount of loss and liability. This is both because cyber losses are often unconnected to past performance, and due to the overall rapidly evolving threat and protection landscape. The insurance industry is understandably and historically risk-averse, and all these factors have led to the slow and uneven growth of cyber insurance at first. Nevertheless, as risks and losses mount, insuring them has become essential, and at this point there is no holding back the massive growth of cyber insurance going forward.
Sapiens strategic partner MunichRe estimate that in just the four years from 2021 to 2025, the global cyber insurance market will more than double from $9.2 billion to $22.1 billion. As the saying goes, a billion here and a billion there, pretty soon you’re talking real money. It is no longer tenable to categorise cyber as a niche product. With all its attendant challenges and uncertainties, P&C insurers need to be making serious offerings. But how is an insurer inexperienced in cyber to get off the ground with new products?
Sapiens Cyber Solutions
Sapiens has a number of products and services that will help insurers of any size get up to speed with cyber insurance.
For example, the Sapiens Cyber Insurance Accelerator Product is designed to launch fast and learn without building from the ground up, covering both personal lines and commercial speciality. It is an example of a smart and intelligent product configurator, embedding workflow and business process automation on a single product line to improve speed to market, change and configuration.
Sapiens also provide opportunities to promote cyber risk assessment and integrations with industry specialists such as KOVRR and other providers to model highest loss scenarios and provide risk mitigation services.
In addition, there is Sapiens IDITSuite, a digitally led, award-winning, end-to-end, cloud-based modular insurance platform; supporting personal and commercial lines of business from acquisition to billing, claim and renewal. IDITSuite supports the ability of insurers to sell covers underwritten by external insurers. This means that even if the insurer doesn’t underwrite cyber insurance, then they can still sell it on behalf of another insurer.
Knowledge built over the past few years to adequality price Cyber risk and move from financial and system recovery to prevention services. The role of Sapiens is to remove the technical barriers of policy management to enable our customers quickly launch and automate technical cyber policies.
Learn more about Sapiens Commercial Property and Casualty solutions.
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Graham Gordon Graham Gordon joined Sapiens in 2021 as Product & Strategy Director for P&C. Graham holds a bachelor's degree from Lancaster University, post-graduate qualifications from the Chartered Institute of Marketing and a master's degree from the University of Cambridge, graduating from the Judge Business School's Executive MBA Program.