The massive Sony Corp. breach that occurred at the end of 2014 has been a huge example of the far reaching and costly effects a breach can have — and not just to businesses. Greg Schaefer, president and founder of Schaefer Enterprises, says it will also force underwriters to take a better look at their underwriting of cyber policies as they have been forced to face the fact that a cyber event can be more than just the stealing of personal information or credit card numbers.
“The Sony event was very significant because it was a different type of breach that people weren’t expecting and any time it happens to a company of this size it is shocking,” says Schaefer. “What’s going to happen to policy language to protect carriers from this? Are there exclusions they will come up with?”
There will also be more pressure on insureds to disclose information about their information security to underwriters and protect their sensitive information properly.
“There’s a real challenge getting people to be more upfront about the level of security control they have in place, and also whether they are taking the right kind of steps when they’ve been advised by their professional advisors or by the underwriting agencies themselves,” said Andrew Barratt, European managing director for global independent audit and compliance firm, Coalfire. “I think you’ll see the underwriters over the next two years be a much more regular part of a lot of security risk management, particularly in big corporates, where they’re transitioning quite a large risk to them.”
Schaefer says he doesn’t expect carriers will change their policy language too much in the short term, but rates for information security and computer systems exposures will likely go up.
“I don’t think rates supported that type of exposure and that’s where it’s going to affect the industry,” he says. “I think all segments will be impacted with rate increases because we now see it can happen to anyone.”
Schaefer says this should be motivation for agents to prepare themselves and learn about these policies.
“These incidents are definitely increasing demand and making this coverage a much easier sell. People want to be educated on what the coverage is and it’s our job to teach them and explain what coverage is afforded to them,” he says.
Topics Cyber
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