Producers: Your next big opportunity is in cyber, but know your coverages

While it is extremely difficult to determine how large the cyber-insurance market currently is in the U.S., conventional wisdom points to an annual premium volume in excess of $1.2 billion, and possibly as high as $1.5 billion. In any event, the potential market is huge and expanding.

From a revenue standpoint, cyber coverages could rise to the level of CGL policies, especially in the small- to medium-sized-risk sector, as everyone has a need for some cyber-liability products.

Producers are cautioned to take the time to learn what cyber coverage encompasses so they can be proactive and use the requisite skills and knowledge to respond appropriately to clients' needs.

As of 2013, in the U.S. market alone, there were 14.72 million self-employed businesses, including 9.41 million unincorporated self-employed and 5.31 million incorporated self-employed individuals. What stands out about this group is that an overwhelming majority of these entrepreneurs utilize the Internet and many third-party vendors in their business and personal activities. More directly, most have exposure to cybercrime and a growing need for cyber-liability coverage.

While ISO established a standard cyber policy in the marketplace, there is large variation among carriers providing standalone policies. There is an even wider disparity among those insurance carriers providing add-on cyber coverage by endorsement to a traditional policy. 

More importantly, add-on risk-management services really differentiate carriers' offerings. These value-added risk control and management services can easily justify the premium differences among the carriers. 

Most of these additional resources are developed by specialists in the field of cyber security and then made available to the policyholder at no additional, or a very nominal, charge. Such services  may include call-center and notification response, cyber-specialist attorneys, crisis-management assistance, forensic assistance, training, testing for system vulnerability and credit monitoring. There are also pre-loss services such as a help desk or information portals to assist the insured in managing cyber exposure.

As the chart below illustrates, not all cyber policies are created equal, nor is the risk appetite standardized. Since cyber liability is a sold product and there are so many variables in exposure and need, the producer must put forth a great amount of effort to know what he or she is selling in order to take advantage of the growing market for cyber-liability insurance.