Challenges and opportunities for insurance brokers placing cyber risk

The top three challenges for brokers placing cyber risks…

Challenge No. 1: InfoSec and risk management functions within companies can be separate.

According to CyberCube, there is a common disconnect between company employees who focus on information security (InfoSec) and risk management and insurance, especially at small and midsize organizations. At small operations, InfoSec and risk management positions may not exist, and companies may not have the resources needed to develop sound InfoSec or risk management programs. So insurance brokers often face the challenge of educating clients about cyber risks, cyber insurance or both.
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Challenge No. 2: Cyber often gets little time and attention as part of the overall risk management purchase process.

A small company spends, on average, just a few hundred to a few thousands of dollars on their cyber insurance, says CyberCube, and the coverage often is bundled as part of a larger insurance program. Because cyber risk is complex and ever-evolving, brokers face the challenge of explaining to business clients the fundamental exposures and how they relate to various cyber threats. This challenge is only exacerbated by the limited time brokers have to explain these concepts during renewal periods or a new business Request for Proposal.
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Challenge No. 3: Differences in cyber policy language makes it difficult to understand the coverage in absolute terms.

The cyber insurance market has boomed in recent years, with new players entering the market seemingly one after another. Because cyber insurance is treated as a discretionary spend, policies do not rely on market standard ISO language, explains CyberCube, with each insurer framing their policies to cover the risks in a manner they are most comfortable with. Because of this, CyberCube suggests the need for specialist brokers who can pair and map nuanced language to many companies’ disjointed understanding of cyber risk.
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Four opportunities for cyber brokers today…

Opportunity No. 1: Brokers are trusted advisors.

Insurance brokers are in a unique position to help their clients understand how categories of cyber exposure map to insurable losses and how to mitigate risks, says CyberCube. Clients will want figures and estimates to help inform how to structure cyber coverage appropriately.
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Opportunity No. 2: Brokers can add value by mapping exposure to coverages and policy terms.

Standalone cyber policies generally address the core cyber risks but not all the risks that exist in cyberspace. This can lead to gaps in insurance coverage. Brokers can leverage their various insurer relationships to provide fit-for-purpose solutions to clients, says CyberCube. For example, a broker can request standard coverage endorsements or ask for more nuanced and tailored language to address a company’s unique aspects.
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Opportunity No. 3: Getting a ‘yes’ from insurers.

Brokers are the intermediary between a client’s risk and the insurer’s underwriter. This can be a challenge for brokers as they balance a fair portrayal for their clients’ exposures while also aiming for the best possible coverage for their clients, but it also can be an opportunity, explains CyberCube. As the cyber market grows, brokers can feed insurers’ appetite for expansion by helping underwriters become more comfortable with cyber risks. Brokers can achieve this by understanding clients’ and underwriters’ point-of-view to secure mutually-beneficial deals for both parties.
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Opportunity No. 4: Standalone cyber is just one aspect of a well-rounded insurance program.

Cyber insurance is not yet an ‘all-risk’ solution, so brokers need to know where one policy ends and another begins, as well as possible coverage gaps in between. “There is an enormous opportunity for brokers to play a pivotal role in facilitating collaboration across multiple lines of insurance cover,” says CyberCube in its “The Role of Intermediaries in Placing Cyber Risk” report. “This can sometimes take the form of crafting an endorsement for a standalone cyber policy, but may also mean working in collaboration with other lines of business.”
Cyber insurance brokers can collaborate with brokers in other lines of business internally at their brokerage or work eternally with underwriters in various product lines at insurance carriers. However, CyberCube also notes that addressing and covering all exposure gaps is not always the right answer. Instead, the solution brokers should aim for is simply understanding the limits of an insurance program and offering a cost-benefit analysis of coverage gaps.
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