How UK Brokers View Cyber Insurance

May 15, 2018

The majority of UK brokers see cyber as an important and growing market yet nearly one-third admit to a “poor” or “very poor” understanding of cyber risks and cyber insurance, according to research from DAS UK Group, a UK legal expenses insurer, and HSB Engineering Insurance.

The “DAS Market Barometer: Cyber” measured brokers’ level of understanding when it comes to cyber risks and cyber insurance, how they understand their clients’ needs, and their perception of the cyber insurance market.

According to this research, the cyber insurance market appears to be developing rapidly with 58 percent of insurance brokers expecting it to grow even further in the next two years. However, the results reveal that almost one-third (31 percent) of UK brokers admit to poor or very poor understanding of cyber risks and cyber insurance. National brokers that are based in London – and members of networks – and British Insurance Brokers’ Association (BIBA) members tend to show higher understanding of cyber.

Brokers are conscious of the burgeoning importance of cyber insurance with 56 percent of respondents rating cyber as either the most important, or among the most important insurance risks faced by small and medium sized enterprises (SMEs) and consumers.

Brokers perceive general hacking, online fraud, identify theft and phishing as the top four risks consumers are exposed to, while for SMEs, brokers believe online fraud, hacking, theft of customer or business data, and loss of data are the top four risks.

In terms of market sectors, the report found that while cyber insurance products for businesses are being sold by over two-thirds of brokers, cyber for consumers is still in its infancy and is sold by just 13 percent of brokers surveyed (national brokers and BIBA members are the most proactive in selling business cyber cover).

The research further indicates that 90 percent of brokers expect demand for cyber to increase considerably in the next couple of years with anticipated growth significantly higher among BIBA members.

Brokers have their own views of what insurers can do to help sell cyber insurance products. Almost a quarter (23 percent) believe that making policies simpler is the most important thing insurers can do to support them, followed by providing better explanation of policies (19 percent) and provision of better training for brokers (15 percent).

Th research appears to affirm the hypothesis that there might be an emerging gap between understanding, attitude and behaviours, according to James Henderson, managing director Insurance, UK & Ireland, DAS UK Group.

“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,” Henderson said.

Henderson said there is a real risk that consumers or SMEs are buying cover for cyber that they already have protection for via other insurance products such as legal expenses insurance.

Stephen Worrall, managing director, HSB Engineering Insurance, commented that until recently cyber insurance was primarily focused on large businesses and corporations but personal cyber insurance is the next stage in 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,” he said.

The Cyber Market Barometer is based on three pieces of research commissioned by DAS UK Group and HSB including:

  • A survey of consumers from December 4-11 2017 with 1,000 representative sample of UK adults
  • A survey of SMEs from 23 February 23 – March 9, 2018 with 200 interviews with SMEs
  • A survey of brokers in March 2018 with 250 respondents from the general insurance brokers: 52 national brokers, 51 super regional and 147 provincial brokers.

Topics Cyber Agencies

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