The growth of cyber insurance is widely regarded as good news for the insurance industry. However, even insurers not offering cyber cover could find themselves being impacted financially by having to cover the cost of cyber-related claims due to ambiguous policy wording, according to GlobalData.
Daniel Pearce, insurance analyst at GlobalData, said, "The considerable growth in the uptake of cyber insurance is being driven by a combination of factors. Firms' increased awareness about their exposure to cyber risks is playing a key role. However, this awareness is not restricted to cyber insurance policyholders. The percentage of SMEs that detected cyber breaches or attacks was greater than the percentage with cyber insurance in place across 2016–18. For example, in 2018, 40 percent of micro businesses detected a cyber-breach yet only 14 percent had cyber insurance in place."
According to GlobalData, this situation – where the uptake of cyber insurance is far lower than the percentage of business owners detecting a cyber-breach – means commercial insurance providers may be exposed to cover the cost of cyber claims on traditional policies such as business interruption. In response, GlobalData pointed out, AIG plans to ensure its exposure is clearly defined by transitioning towards affirmative cyber insurance. From 2020, all of its commercial property and casualty insurance policies will affirmatively cover or exclude both physical and non-physical cyber risks.
Mr. Pearce added, "Clearly, steps such as this, which clearly outline what cyber risks are insured, will benefit insurance providers, enabling them to exert greater influence over their exposure. Yet, policyholders also stand to benefit. Moves such as AIG's transition towards affirmative cyber insurance will help ensure policyholders have a clear understanding of which cyber perils are covered through a commercial insurance policy that is not cyber-specific. This, in turn, will help businesses owners more easily identify the benefits offered by a specialist cyber insurance product."
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].