With the risks of cyber breaches, corporate cyber-espionage and ransomware becoming so costly to a firm’s finance and reputation, studies have shown an increased demand for cyber insurance. According to a September survey by the Risk and Insurance Management Society, 80 percent of the companies bought policies that exclusively pertained to cybersecurity in 2016, a purchasing increase of 29 percent from the previous year. “Respondents are most worried about reputational harm (82 percent), notification costs (76 percent), and business interruptions caused by both network outages (76 percent) and data loss (75 percent) from cyber breaches. Cyber extortions (63 percent) and the theft of trade secrets or intellectual property (42 percent) are also concerns,” according to the report. These fears have resulted in almost 70 percent of companies transferring risk of cyber exposure to a third party, and spending more than $1 million on cybersecurity protection, including active monitoring and employee education, as reported by 24 percent of risk managers.
The increase in demand is also due to the responsive increase in supply of cyber insurance carriers in the market. As of 2015, there are more than 60 companies covering cyber security in the U.S., with the global market seeing a similar growth. Sales are expected to reach $7.5 billion by 2020, and Leidos Risk Manager Rich Johanson says that carriers are expanding coverage and creating new products with equanimity to counter the augmenting cyberterrorist activities.
This leaves a great deal of work to be done among insurance agents and brokers. The versatility of insurance packages is not the only factor in increasing sales; education is also vital. The take-up rate will increase as more people are educated. Emily Cummins, a member of the RIMS board of directors, explained how “as insurance suites become increasingly available, more companies want to procure a plan that can fit their own unique needs.” Of the businesses that purchased cyber coverage last year, approximately 82 percent said their coverage met their needs. Sales will increase as carriers grow more proficient at underwriting a clear and coherent package.