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Advisen Cyber FPN - Friday, September 18, 2020

   
Taking steps toward a proactive future for cyber insurance

Advisen

Taking steps toward a proactive future for cyber insurance

By Erin Ayers, Advisen

With cybersecurity and risk management being key to preventing breaches, a shift in cyber insurance to become more proactive rather than reactive represents the “natural evolution of the product,” according to Graeme Newman, chief innovation officer for CFC Underwriting.

CFC this week announced a significant upgrade to its cyber incident response mobile app to help insureds identify potential problems and head off cyber events with alerts about critical vulnerabilities and time-sensitive threats. First introduced in 2016, the app also allows for claims reporting and technical specialist assistance.

“We’re leveraging technology to provide policyholders with what we believe is the next generation of cyber insurance services,” Newman said, who spoke to Advisen this week about his view of the market. “The future of this class depends on us going beyond coverage alone by giving clients access to in-house cyber claims expertise and tailored risk management services such as the proactive alerts we’ve introduced through the app.”

In the early days of cyber insurance, the industry’s biggest challenge was how to sell it, Newman noted. Prices were high and perceived risk was low. Since then, prices have dropped, coverage has expanded, and the claims environment has steadily worsened.

“As the market price and the true risk price” get closer together, insurers must improve their underwriting results while not sacrificing market share.

“A bigger book of business gives you scale, and scale is a good thing,” he said. “Scale gives you access to more data and access to reduced claims costs. Size isn’t just a vanity thing, it’s critical to long-term success.”

Cyber insurers have long offered value-added risk mitigation services, but take-up has been low. The industry needs to take helping insureds manage their risk much more seriously now to maintain profitability.

“Our interests are aligned in getting our problems fixed,” said Newman. One of the most prevalent threats today, ransomware, is deployed “in incredibly simple ways” that organizations can address with the help of their insurers.

“Forty percent of our ransomware claims are from open RDP ports. That’s something we can monitor and identify,” he said.

Targeted, relatable insight and resources have become essential for smaller and medium-sized organizations, Newman told Advisen. They also need to provide accessible value for small business owners, since the typical view of a busy executive might be, “I don’t need a constant flow of information, just let me know when it really matters.”

“That’s where the insurance industry can really make a difference,” said Newman. Letting school officials know about cybercriminals actively targeting similar schools, for example, or explaining how a specific vulnerability or open port might translate into a claim gives insureds the information they need when they need it.

“When we talk about CVE numbers, complex Oracle vulnerabilities, they don’t understand,” he said. “When we tell them they have their entire customer database open to the internet, that’s something they understand.”

A more proactive approach to cyber insurance also stands to improve the reputation of the industry and buyers’ view of the value. Most insureds would rather not have a claim, and many remain skeptical that coverage will pay out.

“Insurance is a lot of money for a piece of paper, or in most cases now, a PDF. An app really embodies what you’re buying. It’s 24/7 access to a global team. My hope and early indications are that’s a very compelling proposition,” he said.

Cyber insurance also needs to tell its story better, according to Newman. The industry continues to innovate and is still “wildly competitive, an active, vibrant market, with 100-plus markets.”

“Let’s focus on what our value proposition is,” he said. “It’s a great product, a phenomenal product. We need to shout about the successes.”

Editor Erin Ayers can be reached at eayers@advisen.com

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Advisen