Cyber Risks

Young Brokers for a Young Product

Younger brokers play an important role in helping insureds understand cyber risks.
By: | April 20, 2016

A broker’s youth can often work against them, as many clients typically prefer the most seasoned professional to lead the broker team, or to work with them on a regular basis.

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But the case can be different when dealing with cyber insurance, as the product itself is fairly young, experts said.

Cyber insurance has only been around for about 15 years, and is now very different than it was many years ago, when it was a liability-only product, said Stephanie Snyder, national cyber sales leader in the financial services group at Aon Risk Solutions in Chicago.

The evolving cyber insurance field provides a lot of younger brokers “a ton of opportunity.” — Stephanie Snyder, national cyber sales leader, financial services group, Aon Risk Solutions

Given the small number of underwriters and brokers who have historical expertise with the product, the evolving cyber insurance field provides a lot of younger brokers “a ton of opportunity,” Snyder said.

“Since cyber insurance itself is such a young product, there’s really only a handful of people who were around when it came into being,” Snyder said.

“So as need for the product continues to grow, there’s a need for brokers with product expertise in cyber, whether they come from fields outside insurance such as technology or legal, or whether they are joining the insurance industry as their first job.

“So long as brokers demonstrate their technical expertise, clients tend to be more forgiving of youth in this situation.”

That is not to say that Aon doesn’t have both senior and junior brokers on its teams, she said.

“We don’t push any person who doesn’t have the appropriate experience — we want all people to be learning together with cyber,” Snyder said. “It is an evolving product as cyber exposure continues to evolve.”

Jeffrey Lattmann, executive managing director, national executive liability practice with Beecher Carlson in New York City, said that clients want the most knowledgeable cyber professionals placing their business in the marketplace.

The younger brokers are likely to be more in tune with various parts of the risk due to the advancement of technology.

“This encompasses a team made up of seasoned brokers with significant technical knowledge, understanding of the market appetite for a specific risk, experienced risk management personnel and younger brokers who bring a different level of understanding technology risk to the table,” Lattmann said.

“Additionally, helping to identify areas of risk aids in the understanding of the profile of the company looking for coverage.”

For all types of insurance, Beecher Carlson has a senior broker leading each client account, with younger brokers accompanying them to client meetings in order to learn, he said.

Senior brokers have typically been in the business for 15 or 30 years, and understand strategy, insurance companies’ appetites for risk, how to best structure specific programs, and placing sophisticated transactions with significant limits.

Younger brokers are likely to be more in tune with various parts of the risk due to the advancement of technology.

“We just took over a large client and they specifically wanted a senior person on our team to be the lead person,” Lattmann said.

“The other brokers they’ve used in the past had senior people in the presentations, but when it got down to the transaction, they never saw them again. We committed the senior person to be the point person all the time.”

Still, young brokers need to sit in on meetings with the client.

“In order for seasoned professionals to educate the young brokers to one day be leaders, younger brokers have to spend time with clients and experienced brokers,” he said.

Martin J. Frappolli, senior director of knowledge resources, The Institutes

Martin J. Frappolli, senior director of knowledge resources, The Institutes

“Working in the background is not the most effective learning tool — they have to be upfront and learning alongside the senior people.”

Regardless of age or experience, a young producer should nevertheless take “a mature risk management approach to cyber — measure the exposure and mitigate it,” said Martin J. Frappolli, senior director of knowledge resources for The Institutes’ risk and insurance knowledge group in Malvern, PA.

When there is a newly discovered risk, insurers typically scramble to exclude coverage and those at risk scramble to insure the risk, Frappolli said. The Institutes has been examining the ramifications of the maturity model pertaining to cyber insurance.

“As time goes by, market participants understand that insurance is just one tool in a risk manager’s toolbox.” — Martin J. Frappolli, senior director of knowledge resources, The Institutes

“As time goes by, market participants understand that insurance is just one tool in a risk manager’s toolbox,” he said.

“We like to compare cyber to fire. We build fire-safe structures, we hold fire drills, we install extinguishers and sprinklers. We do all we can to mitigate the fire risk. Then we buy insurance.

“At some point, we’ll have better cyber hygiene and follow the mature risk management model just as we handle the threat of fire.”

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Cyber is “immature” in the sense that some insurers still scramble to exclude it — though many are figuring out, as always, there is a right price for every risk, Frappolli said. Those at risk often do nothing to mitigate the risk other than seek insurance.

“All this is to say that an experienced agent or broker already knows all this,” he said. “If the young producer is focused on sales instead of risk management, he or she could indeed be closed out by prospective customers.

“But when the agent or broker takes a mature risk management approach to cyber — measure the exposure and mitigate it — that approach should be persuasive to any client.”

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]