Biggest barriers to selling cyber policies

Product complexity remains a huge obstacle to selling cyber insurance to neophyte business clients, brokers told Canadian Underwriter in a January online survey.

A stronger emphasis on cyber education — to clients, brokers, and underwriters alike — is critical to boost cyber insurance sales, they said.

“It’s tough to explain. And it’s tough to interpret coverages and exclusions.” one broker stated in the survey, when respondents were asked about their satisfaction with cyber insurers’ offerings. Sixty-seven brokers answered the online survey. Their responses echo frustrations broker sources have expressed anecdotally to CU for years.

For example, 67% said it was either ‘difficult’ (61%) or ‘very difficult’ (6%) to convince clients they need cyber insurance. The coverage can be hard to understand on its own. But when you add in the complexity of insurance contract policy language, the going gets tougher.

“Insurers need to communicate more clearly what is not covered in their terms, as cyber wordings are difficult to discern and compare, and technology terms can be different from one company to the next,” one broker commented.

Plus, cyber market competition has multiplied the number of cyber definitions and variety of policy exclusions.

“Insurers hide various limitations based on transactional counts, restrictive language, and different terms used compared to their competitors, thus creating client confusion,” one broker noted. “There is not a clear language on any retro coverage if accounts are switched each year. [Coverage] gaps can occur.”

Client education

The need for more education about cyber products figured into the two most-common reasons why clients declined coverage. Tied at 41%, brokers most often heard clients refuse coverage because:

their data isn’t worth stealing; and
cyber criminals aren’t interested in small businesses.

So it shouldn’t be surprising that 54% of brokers said they had to explain the impact of a cyber breach to clients. And 49% said they had to focus on risk exposures with clients (e.g., how security breaches happen).

It’s almost as if clients want their brokers to take on the role of IT expert. “The clients want you to understand their technology for them,” one broker commented. “Many don’t have IT expertise and smaller companies don’t have IT resources.”

Brokers admitted they need to improve their own understanding of cyber to successfully sell it.

“I think the carriers do a good job,” one broker said, when asked what carriers could do to make cyber more appealing to clients. “Brokers need to understand how the cover works and better describe its value.”

Some brokers said underwriters also need a better understanding of the various cyber risk management options available to clients. They contend underwriting flexibility is required to make coverage appealing.

“Unable to get all the baseline risk management in place for the UW [underwriter] to agree [to coverage], due to variability of supply options,” one broker wrote. “For example, I can buy a sprinkler with common specs that all UWs understand. [But] the IT world understands some suppliers of IT security and configurations vary. Trying to fit any unusual solution into a box acceptable for UWs is brutal.”

Sales outlook

Overall, 69% of brokers surveyed said they currently sell cyber insurance, while 31% did not. Of those who did not, about 41% said they were either ‘very likely’ (17%) or ‘likely’ (25%) willing to sell cyber in the future.