Cyber Insurance Today: An Insured’s Perspective

In today’s volatile cyber landscape, organizations face an unprecedented surge in cyber threats, from ransomware and phishing attacks to sophisticated data breaches. Cybersecurity Ventures predicts cybercrime will cost organizations $10.5 trillion annually by 2025. Cyber insurance is key to combating these risks by offering financial protection. However, from the insured’s perspective, purchasing cyber insurance is far from streamlined and frequently leaves them questioning its value. Here are some of the challenges organizations face when obtaining cyber insurance and how value-added services can elevate their experience, making coverage not only a reactive safety net but also a proactive component of cyber resilience.

Challenges for Insureds

Cyber insurance can be complex and confusing for businesses, starting with obtaining a policy. The current underwriting process is often perceived as a hassle, requiring extensive questionnaires and vague answers. Many organizations don’t have a clear understanding of their cyber risk exposures and ways to appropriately mitigate them. Additionally, the lack of standardized definitions across cyber insurance policies can lead to further confusion and misunderstandings.

Complex Policy Acquisition

To obtain a new policy, businesses are required to provide hundreds of answers across detailed forms, engage in complex data collection, and navigate the unfamiliar landscape of quantifying their cyber risk in order to qualify. The data-gathering phase alone consumes a significant amount of time and resources, creating frustration for companies that may lack the immediate, concrete answers insurers require. In addition, they don’t always understand how their responses may influence policy details, including coverage limits and premiums.

Risk Underestimation

Many businesses, particularly smaller ones, often underestimate the risk of a cyberattack. Some of the most common misconceptions are:

• They are too small to be a target of cyberattacks.
• Their limited technology usage makes them less vulnerable.
• Their existing risk management strategies, such as strong security measures, are sufficient to protect them from cyber threats.
• Their existing insurance policies adequately cover cyber risks.

The unfortunate reality is that organizations of all sizes are vulnerable to cyber attacks, regardless of how frequently they are utilizing technology. Also, package policies generally have limitations and exclusions and may not fully protect businesses from cyberattacks. In a report published by cyber insurer, Cowbell, over 70% of small to medium-sized business SME’s stated that a cyberattack could destroy their business. With stakes this high, cyber insurance is essential.

There is also a distinct lack of understanding of what makes a business “insurable.” Chief Information Security Officers (CISOs) often don’t know the cyber insurability of their organization or if that is even quantifiable. With this information, CISOs would be able to track their insurability over time to gauge how well their mitigation efforts are working for them.

Lack of Standardization

Cyber insurance is continuously evolving.  As a result, there’s often a lack of standardized definitions for certain terms, leading to confusion among policyholders. Terms like “cyberattack,” or “cyber terrorism,” can be interpreted differently by various insurers.

For example, what constitutes a “cyberattack” can vary widely. Does it include a simple phishing attempt, a ransomware attack, or a more sophisticated data breach? These nuances can significantly impact coverage decisions and claim payouts. This lack of standardization can lead to misunderstandings and disputes between insurers and policyholders.

The Role of Cyber-Focused Brokers

With minimal education to clarify these challenges, insureds face an uphill battle to navigate an opaque process with limited support. Brokers, while committed to helping their clients, often lack the advanced tools or cyber-specific knowledge to streamline the process effectively.

However, a new generation of cyber-focused brokers is striving to redefine the broker-client relationship. Unlike traditional brokers, these cyber specialists are equipped with tools and insights to offer substantial support throughout the cyber insurance journey. They aim to reduce friction in the new business process, provide practical guidance, and empower clients with a clearer understanding of their coverage.

These brokers are at the forefront of helping policyholders understand and compare various cyber insurance offerings. By bridging the knowledge gap, cyber brokers can foster stronger relationships with clients, enhancing the insured’s experience and bolstering overall trust in the value of cyber insurance.

Broker Added-Value

Brokers can continue to add value by taking a proactive approach with their clients. Like most insurance policies, cyber insurance remains largely reactive, offering financial coverage post-incident rather than supporting a proactive risk management method. This limitation leads to a question of whether cyber insurance can evolve beyond financial compensation and actively help manage cyber risk.

While traditional cyber insurance policies often struggle to cover emerging threats, a focus on value-added services could transform how brokers and insurers support their clients. Ideally, cyber insurance should supplement proactive risk management, covering the risk left after other security measures are in place. This shift would not only heighten the value of cyber insurance but could also make it more relevant for today’s threats.

Value-Added Services: Insurance Experience

Addressing the gaps in cyber insurance requires value-added solutions that extend beyond risk transfer alone. From streamlined applications to proactive risk assessment, these enhancements can transform the insured’s experience, adding real value that resonates with their organizational goals.

Streamlined Applications

One of the most significant challenges policyholders face is the time-consuming process of filling out questionnaires and undergoing extensive data scans. However, leveraging automation and advanced data collection tools, a value-added cyber insurance product can dramatically reduce the time and effort needed to obtain a policy. This streamlined approach simplifies the application process for insureds, getting them coverage quicker.

Proactive Risk Assessment & Management

A proactive risk assessment can start at the broker level. A value-added approach empowers brokers to work as trusted advisors, providing insights beyond the standard risk transfer model. In addition to offering insureds a reliable point of contact throughout their policy term, brokers also help them navigate complex cyber policies and address emerging concerns. This level of service extends beyond transactional insurance, offering policyholders ongoing support and facilitating their understanding of the policy.

Through advanced data analytics, insureds gain customized risk mitigation strategies that reflect current cyber threats and insurance trends. Brokers, leveraging this data, are better equipped to provide recommendations tailored to their client’s unique risk profiles, ultimately empowering insureds to make informed, data-backed decisions. This proactive relationship fosters a stronger connection between brokers and insureds, building trust, and creating a clear and mutually beneficial line of communication.

Once the risks are identified, cyber insurance can then be a valuable resource for proactive risk management. Built-in services like vulnerability scanning, continuous monitoring, and incident response planning, strengthen an insured’s defenses against emerging threats, thereby reducing the likelihood of a successful cyber attack and enabling faster recovery when incidents do occur.

Efficient and Transparent Claims Processing

In the event of a cyber incident, timely claims processing is essential to restoring operations and minimizing losses. Value-added insurance models simplify the claims process, offering clearer communication and faster response times to help insureds recover efficiently. A smoother claims experience reinforces the insured’s trust in their coverage, contributing to the perception that cyber insurance is a valuable, reliable part of their cyber risk management strategy.

Real Cyber-to-Insurance Insights

Cyber insurance products are increasingly moving towards incorporating quantifiable cyber risk management, providing insureds with insights into their insurability. By tying cyber risk quantification tools, such as risk scores, insurability ratings, or cyber posture assessments into the insurance application and renewal process, policyholders can gauge their vulnerabilities, identify areas for improvement, and, ultimately, make informed decisions to bolster their defenses.

This continuous evaluation and reporting of cyber risk aligns insurance with clients’ security goals, enabling insureds to report improvements directly to their board, track their insurability over time, and demonstrate a proactive approach to risk management.

Better Understanding of The Policy

Value-added cyber insurance offers policyholders a clearer understanding of their coverage terms, making it easier to distinguish between inherent and residual risks. Brokers play a critical role here, helping insureds dissect complex policies and understand what is and isn’t covered. This transparency empowers organizations to make informed decisions about their cyber risk management strategy, avoiding coverage gaps and ensuring that they only rely on cyber insurance for risks that their internal security measures cannot fully mitigate for the time the policy is in place.

Conclusion

The current cyber insurance landscape faces significant challenges from the insured’s perspective.  Complex underwriting processes, the limited value in strict risk transfer, and the perceived minimal proactive support, leaves many businesses wondering if cyber insurance is worth obtaining. However, a shift towards value-added cyber insurance promises to address these issues, transforming the insured’s experience and maximizing the role of cyber insurance in organizational resilience.

With streamlined processes, proactive risk management, and stronger relationships between brokers and insureds, value-added cyber insurance can elevate the entire insurance value chain. As the industry continues to evolve, adopting a collaborative approach will be essential to delivering sustainable value and ensuring long-term success in a rapidly changing cyber landscape.