Demystifying cyber insurance coverage | Deloitte

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Demystifying cyber insurance coverage

Clearing obstacles in a problematic but promising growth market

Organizations continue to invest in cybersecurity efforts to safeguard themselves against threats, but far fewer have signed on for cyber insurance to protect their firms after an attack. Why not? What roadblocks exist, and what steps could the industry take to help clear them?

About the report

This report elaborates on the obstacles that firms might see when it comes to cyber insurance coverage. The obstacles are viewed from two different angles: the cyber insurer's perspective, and the cyber insurance buyer's perspective. Strategies are subsequently provided as to how these parties can overcome these obstacles in the best way possible, and also what the future might hold when it comes to this subject. The report therefore consists of the following chapters:

  • Cracking the code on cyber insurance
  • Obstacles from the cyber insurer's perspective
  • Obstacles from the cyber insurance buyer's perspective
  • Strategies to overcome cyber insurance growth obstacles
  • Where do cyber insurers go from here?

Please find below a short recap of each chapter.

Demystifying cyber insurance coverage

Cracking the code on cyber insurance

With most property and casualty insurers struggling to grow in a slowly recovering economy, an overcapitalized market, and a historically low interestrate environment, why isn’t the sale of cyber insurance gaining momentum more quickly, given the rising profile of the risk? These obstacles can be viewed from an insurer's and consimer's perspective. 

Obstacles from the cyber insurer's perspective

For insurers, there are some obstacles when it comes to cyber insurance coverage. First of all, the dearth of data leads to a vicious circle in cyber insurance. Secondly, cyberattacks continually evolve, while new risk keep emerging. Thirdly, insurers fear a potential catastrophic accumulation of cyber exposure. And finally, tunnel vision limits the appeal of cyber insurance products.

Obstacles from the cyber insurance buyer's perspective

For buyers of insurance coverage, there are several obstacles as well: buyers often don’t understand cyber risks or their insurance options, cyber risk can be spread over a wide range of coverages, cyber policies lack standardization, and the legal landscape remains in flux.

Strategies to overcome cyber insurance growth obstacles

There are several strategies that allows insurers and consumers to overcome the obstacles concerned with cyber insurance coverage. For example, data-challenged cyber insurers can buy time with alternative approaches, insurers could offer holistic cyber risk management programs, intermediaries should keep raising risk awareness, and standardizing policy language could boost consumer confidence.

Where do cyber insurers go from here?

But being in the business of risk, the industry is also in a prime position to capitalize on what is likely to be increasing interest in the purchase of cyber insurance. That is, if they can crack the code before buyers find another way to cover their exposures. There are some crucial questions insurers should keep in mind when formulating their strategies: 

  • Can we assess this risk with our current resources? 
  • How might we work within the industry to standardize our policy language, while still leaving room to differentiate via additional coverage and service options?
  • What can we learn from our own direct experience as insurance organizations managing cyber risks? 

More information?

For more information about insurance, please contact Jelle Niemantsverdriet via jeniemantsverdriet@deloitte.nl / +31882882433.

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