Although a majority of UK brokers consider cyber to be an important and rapidly expanding market, 31% also admit that they possess ‘poor’ or ‘very poor’ understanding of cyber risks and cyber insurance, according to a survey by DAS UK Group and HSB Engineering Insurance.
DAS and HSB considered these results to be concerning, particularly as 58% of respondents believe the cyber markets will grow even further in the next two years, while 90% expected demand to increase considerably over this same period.
Brokers based in London or who were members of the British Insurance Brokers’ Association (BIBA) tended to profess a higher understanding of cyber, anticipated higher levels of growth, and were more proactive in offering business cyber cover.
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.
“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.”
Currently, cyber insurance products for business are being sold by over two-thirds of UK brokers, although cyber cover for consumers is not yet widespread, offered by just 13% of surveyed brokers.
A quarter of brokers suggested that insurers need to further support brokers by simplifying their cyber products, while 19% felt they should be provided with better policy explanations, and 15% appealed for better cyber training.
Henderson continued: “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.”
Stephen Worrall, Managing Director, HSB Engineering Insurance, also 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.”