Insurers may need to change their underwriting and pricingapproach to meet bullish forecasts for sales of cyber coverage, considering thespeedbumps keeping many carriers from stepping on the acceleratorand prompting the majority of potential buyers to hit thebrakes.

In theory, cyber insurance should be a product that sellsitself, given the increasing frequency and severity of high-profilehacker attacks against major organizations as well as the growingnumber of individuals coping with online identity theft. Yet inpractice many insurers are struggling to get a handle on thispromising but problematic market, while the majority of buyers arehesitating to add the coverage to their riskmanagement portfolio.

Cyber remains a relatively small niche market

Why is that? With the stage seemingly set for dramaticallyhigher demand, and in a property and casualty market starved fororganic growth, you might expect sales of cyber policies to besoaring exponentially. In reality, while growth projections arebullish — with some predicting U.S. sales to double or even tripleover the next few years — cyber insurance remains a relativelysmall niche market. The line generates somewhere between $1.5billion and $3 billion in annual U.S. premiums, according tovarying estimates by regulators and rating agencies — representingonly a tiny fraction of the more than $500 billion U.S. carrierswrite annually for all lines.

There certainly appears to be plenty of room for growth,considering that just 29 percent of US businesses had bought cyberinsurance as of October 2016, according to a "Market Watch" surveyconducted by the Council of Insurance Agentsand Brokers (CIAB). Even big organizations with potentiallyhuge cyber exposures are going bare in many cases, or at best areunderinsured.

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