Advisen Front Page News
- Wednesday, March 9, 2022
Cyber raised 'alarm bells' for brokers in Q4: CIAB
Advisen
Cyber raised 'alarm bells' for brokers in Q4: CIAB
By Erin Ayers, Advisen
A record rise of 34% for cyber insurance marked the largest average price increase seen in the fourth quarter of 2021, and some brokers feel the line may still be underpriced based on loss experience, according to The Council of Insurance Agents and Brokers’ (CIAB) quarterly market index.
“Cyber continued to raise alarm bells across the industry,” said Ken A. Crerar, CIAB president and CEO, in the report. “The increase in premiums for that line continued unabated in Q4 2021, and the frequency and severity of Cyber claims continued to climb. The industry must take steps to confront this unique, constantly evolving risk.”
The high prices for cyber came “in stark contrast” to moderating premiums in other commercial lines and marked the first time since the post-Sept. 11 hard market when a single line produced an average increase over 30%. Even the next largest average increase fell far below at 15% for umbrella liability and across all lines and account sizes, the average increase came in at 8.7%, CIAB reported.
Directors and officers liability prices rose an average 13%, while employment practices liability and commercial property posted 10.6% and 10.5%, and all other lines showing increases of 8% or less.
Despite the skyrocketing rates, brokers report demand for cyber insurance at an all-time high, with 92% of respondents seeing an increase in buyers looking for coverage. Strict underwriting requirements awaited those buyers, however. Brokers said underwriters required cyber risk management practices like multi-factor authentication, endpoint detection and response, and privileged access management to even extend a quote.
CIAB found several brokers unconvinced that cyber prices have even hit adequacy. One Northeastern broker said, “Cyber was available from almost every carrier at moderate to low pricing,” while another respondent from the Midwest stated that “They [carriers] still weren’t pricing for the exposure based on the losses we were seeing.”
“This suggests that the industry was still grappling with the unique risks cyber posed in Q4 2021, and that there was more inconsistency in how these risks were underwritten by various carriers, unlike older more well-established risks like commercial property,” CIAB commented in the report.
Cyber claim frequency and severity jumped significantly in Q4, with more than 80% of respondents saying they saw an uptick in claims in the line. However, brokers also reported incentives for insureds to improve their cyber risk management, with most carriers offering discounts on software solutions and risk mitigation programs.
