Brokers’ and clients’ understanding of the value of cyber insurance is one of the main challenges in selling the product, one industry expert says.
Clients need to intrinsically understand they need cyber insurance before brokers talk to them about wording comparisons, says Lindsey Nelson, head of cyber development at CFC.
“There is a tendency to speak to clients about the difference in cyber products, without explaining to the client what their exposures are and where cyber can be valuable as a risk transfer mechanism,” she says. “Cyber insurance has historically been sold as a wording, naturally so, as that’s how their other lines of insurance operate.
“But [at] the heart of…the product is the ability to prevent and respond to cyber events.”
Given that cyber is often a client’s largest exposure, it needs to be addressed in an isolated meeting or even as a mid-term touch point with the client, if not as a separate renewal meeting, Nelson suggests. “Rather, it’s often being introduced as a new coverage the client isn’t sure they need.”
Another challenge is that the cyber product isn’t being sold at all. “Technology is an everyday part of our lives that every business relies on and many count as their Number 1 exposure, yet it’s not typically something they proactively seek out to have covered,” she says. “So, it’s still up to the brokers to take accountability and proactively bring it up.”
As easy as it is to get a quote for cyber insurance today (many insurance providers can dictate terms with less than five pieces of information), brokers should be using the quote as a door-opener to explain the risk and coverage to clients, Nelson advises.
The third challenge is price. “It’s an entirely new purchase for the large majority of businesses — over 90% in the Canadian market — in a time where they’re experiencing rate adjustments across other lines.”
Raising awareness
For Adam Mitchell, CEO of Ontario brokerage Mitch Insurance, the main challenge in selling cyber is that awareness still isn’t there. “As prolific as it is for us in our industry, the average consumer and business owner doesn’t see their exposure,” he says. “Especially if you’re not a web-based business, if you’re a manufacturer with just some computer systems and some client specs, they’re really not seeing the exposure…
“One thing that’s helping that is as the commercial market softens and [clients] save some money on their other CGL [expenses], they are occasionally looking to reinvest in some of the other coverage that is helping them.”
From Nelson’s perspective, cyber is only difficult in the way it’s being sold, but this doesn’t have to be the case.
“An important point we shouldn’t forget is that cyber insurance is still a product that needs to be ‘sold’ to clients as if it’s a product they don’t believe they need,” she says. “Unlike their property coverage — many understand the peril of fire or E&O coverage, which is almost always required by contract — cyber insurance is often thought of as an ancillary or ‘nice-to-have’ coverage, despite being most businesses’ largest exposure.”
Brokers also tend to feel they need to become security experts rather than insurance professionals, which tends to overcomplicate the sale to clients.
Plus, “cyber insurance is typically believed to be a difficult or complex product line by brokers, and therefore difficult to sell to clients, when in fact cyber is one of the simplest product lines to understand in the market,” Nelson says. “It’s simply coverage for your intangible and digital assets.”
Feature image by iStock.com/Nutthaseth Vanchaichana
