5 Unpopular Predictions for Cyber Insurers in 2022

December 15, 2021

Cyber Insurers Should Innovate or Expect a Brutal Year

As the crazy rollercoaster ride of 2021’s cyber insurance market comes to a close, many diverse end-of-year predictions are being published. TEKRiSQ’s data-driven observations from numerous real-world client conversations predict more of the same… and then some. Here they are;

SMB Client Apathy and Overconfidence Run Amok– Main Street businesses are still not doing enough, and many don’t care. Overconfidence is a well-documented theme that suggest dangerous behavior may cause more businesses to implode. By some estimates, up to 70% of Small and Medium Sized Businesses fail to protect themselves adequately from cybersecurity chaos. Many transfer risk to insurance, hoping it will be a catch all for literally any event that may occur. The traps of silent cyber and agents unaware or incapable of articulating exclusions give people a false sense of security. Unfortunately, this is on the rise. Life is busy these days, the cybersecurity have-nots are comfortable and overconfident about their inaction, and their vulnerabilities are increasing. So are the concerns over silent cyber, and the legal filings of shocked insureds are likely to build, especially after favorable rulings in state courts. Insurers must do a better job to diagnose risk more thoroughly, communicate them clearly to insureds, address it through loss control and use innovative ways to document every step of the process.
Insurance Agents will NOT Become Cybersecurity Experts– there are a number of attempts underway to deliver part-time education to full-time insurance producers to make them sales machines for cyber insurance companies. This is neither the right approach, nor is it going to be successful. Full-time, fully educated cybersecurity professionals have a difficult enough time keeping up with the space. Vulnerability scans and risk ratings tools can often miss the mark and provide false positives that make securing the enterprise seem like a few quick fixes. This is not something most agents can do for the client, and probably shouldn’t given the E&O risks, as well as the overall importance for the client to have informed expertise guiding their strategy. Don’t hang your business on the Superagent strategy some hope will emerge… it’s not likely to happen. Instead, consider outsourcing the role of risk profiling, and adopting innovation around upfront risk and ongoing client dialogue.
The Market Will NOT Soften– Claims are driving costs through the roof, and the market will not soften anytime soon. According to GlobalData’s Insurance Intelligence Center, The cyber reinsurance market grew over 33% in 2020 to over $7B and is expected to exceed the predicted 28% growth by the end of 2021. This figure should reach $9B, and will become a $20B market by 2025. Agencies across the country see this every day, and are swamped. The future is clear, yet plans to manage it are not. This will prove increasingly problematic, and create a catch-up climate for the cyber insurance market. Find ways to build-in better means of reducing risk, and (finally) delivering true loss control to the marketplace.
Losses from Cyber Claims Will Accelerate– opportunities for bad actors are broadening. The merging of physical and cyber attacks will accelerate the companies in the crosshairs. New identification of broader, more complex attack vectors like the recent log4j developments are bringing millions more businesses into the scope of high risk. Ransomware entrepreneurs find it easier than ever to get started, and the players are crushing it, Damages are expected to cost $5 billion across the globe, a fifteen-fold increase from the $325 million they cited in 2015. Analysts project ransomware attacks to take place every 14 seconds.
Client Demand for Cyber Insurance Will Explode– in recent years, GAO and Marsh reported growth increased growth rates of 60%, with the number of new entrants growing 35%. in 2021, the The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Q2-2021 Report showed Commerical lines average premium price increased some 8%, while cyber premiums exceeded 25% increases by Q2. Everyone has seen it continue to escalate since. Without any of the contributing factors improving and the complacency keeping businesses from implementing solutions, and the growth rates are likely to surge, some expecting 50% or more. Increasingly, businesses cyber risk profile is sought by business partners, various regulators, municipalities and more. TEKRiSQ expects a business’ cyber profile to soon be of equal importance as their credit profile. Businesses of all sizes will need to accept that in a world full of risk, one’s practices, polices and insurance coverage will be exchanged and reported on as commonly as General Liability.