Insurance brokers provide a valuable service to their clients, recommending them the right coverage and acting as an adviser on insurance matters.
Clients are most likely aware that operating a business in a flood-prone area or a suburb with high levels of theft will likely result in higher premiums for those types of insurance. It’s also not a jump for customers to assume that underwriters use decades of static historical information to determine the risk levels of today.
But if the rules of the game are set for most types of insurance, how can brokers explain cyber insurance, which is constantly moving the goalposts?
“Cyber is difficult. It’s hard to understand, and it’s constantly shifting,” says Jane Mason, BizCover for Broker’s Head of Product, Channels, & Risk.
“The threats that pop up today are not the same as those that were here a year or two ago. So, it can make it hard for clients to understand the risks and changes to premiums and coverage.”
Yet there are some things brokers can do to help their clients understand the shifting threat they will increasingly face.
1. Be honest about the shifting risk of cyber attacks
New technology has advanced cybercrime in new and alarming ways. Crypto and locker encryption software has increased anonymity for cybercriminals and the scope of their attacks, while Ransomware-as-a-Service (RaaS) is now a US$20 billion industry￼.
Within the last decade, cybercrime has moved from being the new threat on the block to bringing governments and multinational corporations down to their knees.
SME clients are also increasingly becoming targets. The Australian Cyber Security Centre (ACSC) estimates 43% of all Australian cybercrime is directed at small businesses.
The small business landscape also experienced a significant rise in the average cost per cybercrime report last year, reaching over $39,000 for small businesses and $88,000 for medium-sized businesses, according to the ACSC.
The statistics above paint a problem that is only getting worse. Yet despite growing risk, many small businesses still forego getting cyber insurance.
One of the primary reasons for this is the cost to take out cyber cover, which have doubled on average every year for the past three years, according to Marsh.
But as more claims are made and with the risks increasing across the board, brokers are left with little bargaining power to negotiate better prices for their clients.
“When cyber liability products first came out, the focus for underwriters was on data breaches. Now the game has changed with ransomware being one of the biggest threats. The risk is more volatile, and underwriters factor this into their products and premiums,” says Jane.
So, what can brokers say to their clients to explain all this? Call a spade a spade, says Jane.
“Get your clients to understand that cyber insurance is a moving target. It’s a great way to explain it to your customer so they see why their premiums are shifting with changing exposures.”
2. Partner with a knowledgeable resource
With almost half of SMEs rating their cyber security understanding as ‘average’ or ‘below average’ and spending less than $500 on cyber security annually, small businesses face an uphill battle to getting protected.
But the many fast-moving facets of cybercrime and the risks it presents can also be hard for brokers to get their heads around.
As a broker, Jane says surrounding yourself with partners that have the resources is often the best way to help advise you about the overall status of the market.
“Although small business owners may see cyberattacks hit the headlines, the news is about big companies. This type of information doesn’t resonate with the small business owner,” says Jane.
“The onus is on the broker to equip their clients with the knowledge about cybercrime and its dangers for SME’s so they can make an informed decision about cyber insurance.”
That way, brokers can provide clients with an appropriate cyber insurance policy, which typically gives them access to technical resources.
This usually includes IT security experts, forensic investigators, lawyers and crisis communications specialists who will help manage the situation and get their businesses back online as quickly as possible.
Equipped with the resources of three leading insurer partners and having a dedicated Australian service team in place, brokers have a wealth of knowledge through the B4B platform.
“We’re arming brokers with the knowledge that will assist with explaining this complex subject to their customers,” says Jane.
“I personally recommend brokers sign up to BizCover for Brokers’ Cyber Training Suite and Monthly Cyber Digest for further information and resources about cybersecurity.”
3. Paint a clear path of the future
Being honest about the future is just as important as being honest about the current cyber landscape. While ransomware may be one of the biggest threats in the market right now, who knows what will be developing in a year or two.
“Brokers will need their fingers on the pulse of key changes, so they can relate them to their clients in an accurate and timely manner,” says Jane.
“What can be predicted with some surety is that the cyber insurance market will grow considerably as people increase their knowledge of the threats involved.”
It’s expected cyber insurance premiums will continue to increase, even after surging 80% in 2022.
“People will likely become more aware as the cyber threat morphs into something else once more, prompting greater contestability in pricing, more stringent guidelines for underwriters, and a higher customers reliance on information by brokers,” says Jane.
“Partnering with a resource that not only is at the forefront of cyber insurance but provides multiple options instantly and easily is a sure-fire way of staying ahead of the curve as a broker.”
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