Cyber War Breaches Businesses – But Cyber Insurance Helps Businesses Fight Back
Many would agree with me that using a pen to fill out important paperwork — then sending it in via snail mail — is a thing of the past. Most of these tasks can now be completed, submitted, and processed online almost immediately. It’s easy and convenient.
But it comes with a risk of having your personal information compromised, or even stolen. That can lead to a financial loss and most certainly a major headache.
Indeed, business data breaches are becoming more frequent — and keep increasing in scale. If you went online and Googled “recent data breaches” you would see a lengthy list for 2017 … and it would go on and on if you considered prior years. The problem affects businesses big and small, across the nation and around the world.
So what can be done to mitigate losses and damage to a business’ reputation, as well as its customers and employees, when something like that happens? More and more businesses are turning to cyber insurance products for help, according to filings by P&C insurers.
Cyber insurance is a type of coverage that protects from Internet-based risks. Such risks are generally not covered under traditional commercial liability policies, requiring businesses to seek alternatives. Policies can cover things like legal fees and expenses, recovering compromised data, notifying customers about a data breach, providing those customers with free credit monitoring, and restoring personal identities of those affected.
Based on regulatory data, only 127 out of more than 2,600 P&C insurers were engaged in writing cyber insurance policies in 2016. But the amount of business written by these insurers grew from $480.8 million in 2015 to $920.7 million by the end of 2016. That’s an incredible 91.5% surge in just one year.
Here are a handful of industry leaders with impressive year-over-year growth in this business. Only one of them, Federal Insurance Co. (Rated “B-”), saw a decrease in direct premiums, yet it remained among the top ten in 2016.
Top 10 Cyber Insurance Providers (Listed by 2016 Direct Premiums)
Not only is cyber insurance growing rapidly, but it’s also delivering handsome profits for companies offering the coverage. After claims, it returned $295.9 million in 2015 and $695.4 million in 2016. Claims were quite low compared to collected premium payments in 2015, and the gap increased significantly in 2016.
Cyber insurance is a relatively new business and is likely to grow further as the world becomes more digitalized. But will the profitability keep up? It’s hard to tell as new and ever-larger data breaches can increase the level of claims. But for now, it appears that cyber security insurance is booming … and might be an investment worth looking at.
Keep in mind that an insurance policy will not stop data breaches from happening but it can help to deal with the aftermath. So stay alert while surfing the Internet, and possibly consider one of the ID protection services offered by numerous financial and insurance institutions.
Insurance Insights Edition, By Gavin Magor, Senior Financial Analyst
Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media.