The majority of UK brokers see cyber as an important and growing market yet nearly one-third admit to a ‘poor’ or ‘very poor’ understanding of cyber risks and cyber insurance, according to new research from DAS UK Group, the UK’s leading legal expenses insurer, and HSB Engineering Insurance.
The ‘DAS Market Barometer: Cyber’ measured brokers’ level of understanding when it comes to cyber risks and cyber insurance, how they understand their clients’ needs, and their perception of the cyber insurance market.
According to this research, the cyber insurance market appears to be developing rapidly with 58% of insurance brokers expecting it to grow even further in the next two years. However, the results reveal that almost one-third (31%) of UK brokers admit to poor or very poor understanding of cyber risks and cyber insurance. National brokers that are based in London – and members of networks – and BIBA members tend to show higher understanding of cyber.
Despite a low level of understanding, when it comes to awareness the research shows that brokers are conscious of the burgeoning importance of cyber insurance with 56% of respondents rating cyber as either the most important, or among the most important, insurance risk faced by SMEs and consumers. Brokers perceive general hacking, online fraud, identify theft and phishing as the top four risks consumers are exposed to, while for SMEs, brokers believe online fraud, hacking, theft of customer or business data, and loss of data are the top four risks.
In terms of market sectors, the report found that while cyber insurance products for businesses are being sold by over two-thirds of brokers, cyber for consumers is still in its infancy and is sold by just 13% of brokers surveyed (national brokers and BIBA members are the most proactive in selling business cyber cover). More importantly, the research indicates that 90% of brokers expect demand for cyber to increase considerably in the next couple of years with anticipated growth significantly higher among BIBA members.
The research also identifies brokers’ views in terms of what insurers can do to help sell cyber insurance products. Almost a quarter (23%) of brokers believe that making policies simpler is the most important thing insurers can do to support them, followed by providing better explanation of policies (19%) and provision of better training for brokers (15%).
James Henderson, Managing Director Insurance UK & Ireland, DAS UK Group, said: “It is of little surprise that the majority of brokers in our survey expect the cyber insurance market to grow rapidly in the next couple of years. There is certainly plenty of potential for growth, and it’s very important to remember the vast potential of the consumer market. For many people technology around the home is no longer a luxury, it is an absolute necessity providing entertainment, a means of communicating with friends and family, and organising day-to-day life.
“One of our hypotheses, forged in a concern about some of the ‘mass market’ cyber products that have been launched recently, is that there might be an emerging gap between understanding, attitude and behaviours – and the results of our research certainly support this.
“Mis-selling risk would be a too strong statement to use right now, but when you consider the very real differences in levels of understanding between brokers, consumers and SME’s highlighted in our research, combined with the fact that we have identified that consumer behaviour we call ‘cyber denial’ that has the potential to invalidate the cover of many cyber policies, you can see the potential problem on the horizon.
“Furthermore, as insurers wrestle with the concept of the silent cyber exposure they already have on their books, the very real risk remains that the consumer or SME is buying cover for cyber that they already have elements of protection for via other insurance products such as legal expenses insurance. This raises the question as to whether a standalone or integrated solution is the best approach. But, regardless of the specifics, cyber insurance is undoubtedly going to become protection that all consumers and businesses will seriously need to consider.”
Stephen Worrall, Managing Director, HSB Engineering Insurance commented: “The cyber insurance market is still relatively in its infancy. Until recently cyber insurance was primarily focused on large businesses and corporates. The development of personal cyber insurance is the next stage of the evolution for cyber. With the reliance on our devices for day-to-day living, together with the advancement in the ‘Internet of Things’ and connected smart home technology; security risks and vulnerabilities will undoubtedly increase – as will the impact that cyber-crime has on us.”
The DAS Market Barometer: Cyber (in conjunction with HSB) can be downloaded via www.dasinsurance.co.uk/barometer