Selling cyber insurance is nothing new, after all, it’s been around for about 20 years. However, we have seen a surge in popularity. The reason for this is that cyber insurance covers a lot of things that traditional property and casualty policies don’t. For example, traditional policies only cover physical damage to your building, but cyber insurance covers data breaches and other digital damages.
As a result of an increase in attacks, both in frequency and intensity in recent years, cyber security and the need for coverage is one of the hottest topics among business owners. And it should be a topic you discuss with every client.
Why Cyber Insurance is Important
Cyber insurance is an important part of any company’s risk management strategy. And as your client’s risk manager, you should be talking about this topic with your clients. Cyber insurance provides protection against cyber risks, such as data breaches, extortion, and ransomware attack.
For example, Cerber is the most prevalent ransomware in the world. Within 12 hours of Cerber’s release in 2016, it was already being detected by more than 1 million computers due to its destructive capabilities. Without cyber insurance protection from data breaches, ransomware, phishing schemes, and more, your client’s company could be forced to pay millions for losses.
Cyber Claims Scenarios
“Between March 2021 and March 2022, the average cost of a data breach in the healthcare sector amounted to over 10 million U.S. dollars, up from 9.23 U.S. dollars between May 2020 and March 2021. The financial industry ranked second, with 5.97 U.S. dollars per breach on average.” (Statista)
Every business needs cyber insurance, but they don’t always know or understand why. Let’s look at some examples:
#1 Beauty Salon Owner
Susan owns Lovely Locks Salon. She recently upgraded her POS software to allow her to book appointments online, and accept cash, credit cards, and tap pay. However, 3 months after installing the new system, Susan’s POS system gets hacked through no fault of her own. Her client’s information, not to mention her own financial information was exposed. If someone steals a client’s information via the data breach, Susan could be liable.
#2 Restaurant Owner
Harry owns a gastropub. He recently started accepting online to-go orders. He received an email wanting to place an order. The email contained a malicious link that installed malware on the restaurant’s computer system when it was clicked. Thousands of credit card numbers were stolen. The estimated costs of this attack were more than $1M. This type of attack is known as a phishing email (inspired by an account of an actual cyber attack scenario from Chubb).
#3 Business Owner
A local business owner’s employee recently had their car broken into and their backpack was stolen. The backpack contained a company-issued computer. The computer was password protected but not encrypted. As a result, the business owner had to send out a notice to all their clients (inspired by Great American account of actual events).
What the Cyber Insurance Market Looks Like
The cyber insurance market is growing fast. “Current predictions of the size of the global cyber insurance market suggest rapid growth will occur over the next five years, with the total market size increasing from around eight billion U.S. dollars in 2020 to just over 20 billion U.S. dollars by 2025. (Statista)” That’s a 150% increase in just five years.
Other reports indicate that we won’t surpass the $20B mark until closer to 2030. Either way, the market is heading up and to the right. And with more and more of the world moving to digital – from point of sale systems, and ordering, to banking and data storage – the likelihood of some kind of cyber attack event continues to grow for business owners. As a result, insurance agents have a responsibility to inform and educate clients on the need for coverage.
This can mean big opportunities for agents and brokers who are paying attention to cyber. In fact, in a 2022 survey, only 55% of organizations have any kind of cybersecurity insurance. And of those that do, only 19% have coverage for events beyond $600,000. By educating clients and providing a quote alongside their other coverages, agents can help protect their clients and grow their business without much effort.
The Benefits of Selling Cyber Insurance
In the past, cyber insurance was considered to be a niche product. But as the threat of cyber attacks has increased, more and more businesses are starting to see it as an essential part of their insurance portfolio. There are two main types of benefits for insurance agents and wholesale brokers selling cyber insurance: financial and non-financial.
#1 Financial Benefits
Financial benefits include commissions, bonuses, and payouts for the sale of policies as well as increased revenue from other areas such as general liability, BOP, and workers’ comp insurance. By selling cyber insurance, you can grow your business by up-selling or cross-selling at renewal time. Offering this type of coverage can also give you access to a wider customer base.
#2 Non-Financial Benefits
Non-financial benefits include increased customer loyalty, improved customer service, and a better understanding of what customers need to protect themselves from a potential breach or attack. By growing your offerings, and selling cyber insurance you have a competitive advantage over those that don’t. Plus, talking with your clients about the topic first, it can help increase your retention rates. Another benefit of selling cyber insurance is you can be a leader in your community. With cyber attacks as a hot topic, you can provide your expert opinion for news reports, articles, or your neighbor.
How to Deliver a Compelling Offer for Your Clients to Buy Cyber Insurance Coverage
Cyber-attacks are a growing concern for businesses. The cost of these attacks can be devastating to the victim, costing them money and time that they can’t afford to lose. The good news is that there are ways insurance agents can help educate their clients and offer protection from cyber-attacks. However, many business owners don’t think they need it.
The first step in selling this kind of coverage is to make sure that the customer understands what they are buying. Below are three ways that cyber policies can help business owners. By delivering this information in a way that’s easy to understand, you can make the choice to have cyber coverage simple.
#1 Highlight Potential Losses
Instilling fear into a client is not the best approach to getting them to buy a policy. However, by highlighting how it can protect them from the financial losses that could occur in the event of a cyber-attack or data breach you can build trust and help them understand their options.
#2 Safeguard Reputation
Many business owners may not believe anyone would ever try to attack them. But cyber attacks can come in all sorts of forms, such as an email phishing scheme, a data breach, or a virus that takes over your computer systems. But an attack isn’t the end. The aftermath of an attack can also be devastating. You should By discuss with your clients how an attack could adversely affect their reputation and how cyber coverage can safeguard it when they are hacked or have sensitive information leaked online.
#3 Aid In Notification of Breach
Make sure your customer understands their responsibility after an attack and how a policy can help aid in notification of a breach. “Notifying customers of a breach and other post-breach responses, which is mandated by law, can add up, averaging $1.72 million according to one survey of U.S. businesses (Travelers).”
Not all cyber policies are created equal. When discussing cyber insurance, make sure you clearly communicate what is and isn’t covered so your clients can make an informed decision. Once you’ve explained what the policy is and why they need it, Wheelhouse, a Submission Management Platform by Talage, can help agents provide a quote to their clients quickly.
What Can Happen If You Don’t Offer Your Clients Cyber Insurance Coverage?
Many companies are still reluctant to offer their clients cyber insurance coverage because they think it’s too expensive or they don’t see the need for it. However, this is not true because the cost of cyber-attacks has been increasing over time and will continue to do so in the future.
The consequences of not offering your clients cyber insurance coverage are not limited to your clients. If your clients are the victim of a cyber attack, and they find out you didn’t offer it to them, it could lead to a loss of customers and revenue for yourself. You could also lose customers to competitors who are open about and discuss cyber insurance with their clients.