A Broker Dispels 5 Common Myths About Cyber Insurance
With cyber risks, including data breaches and cyber extortion, more common than ever, it’s important that everyone — brokers, underwriters, claimants — understands the difference between a stand-alone cyber policy and other kinds of policies with cyber elements bolted on to them. Unfortunately for everyone, the mainstream media is making this already complex issue even harder for most people to understand.
In March, we wrote about how the mainstream media’s mischaracterization of property, casualty, or crime policies with some cyber elements as “cyber insurance” leads many businesses to believe that stand alone cyber insurance policies won’t pay out claims. Now, Marsh is weighing in with their own report and they’ve included hard numbers to show that cyber insurance really does pay.
By the Numbers
● Marsh found that the purchasing of standalone cyber insurance amongst their clients doubled over the past five years with 40% now purchasing cyber policies.
● And those policies pay out. Marsh’s report cites a CreditSights statistic which states that in 2018 U.S. domiciled insurers paid $394 million in cyber claims. This is up from $226 million in 2017.
● Reports by individual insurance companies paint a similar picture. In 2018, CFC, a specialty cyber insurer, paid more than 1,000 cyber claims. They expect that number to increase by 50% in 2019. Beazley reported handling more than 3,300 data incidents in 2018.
In their report, Marsh seeks to address five common myths about stand-alone cyber insurance policies, including the misconception that cyber policies don’t cover human error and that recent technology won’t be covered.
“A robust cyber insurance policy can contemplate system upgrades where such best practice is the most cost-effective solution. Cyber insurers embrace insureds that view security as a journey, not a destination,” according to the report.
Furthermore, the report cautions businesses against the belief that data breach costs are only focused on legal liability. Marsh notes that costs associated with crisis management, business interruption, and reputational damage can also be covered under cyber policies.
As technology becomes an increasingly important part of our day to day lives, cyber insurance is growing rapidly as an industry. Sean Conrad, a principal with EPIC Insurance Brokers & Consultants estimates that the market for cyber insurance will be over $10 billion by 2020.
Captives are becoming an increasingly popular way to manage cyber risks and healthcare organizations are leading the charge in adopting these policies. Twenty percent of health care organizations have adopted captives as a way to manage cyber risk.