Specialty insurance is always interesting – at least for those of us that are fascinated with the high degree of innovation in this fast changing insurance segment.
Here’s what 2011 looks like from here, for Cyber/Privacy products:
- Privacy is the key word for prospective insureds, and thus, their agents and brokers; look for more products to cover only the privacy risk. We’ll be hearing a lot more about privacy insurance, and less about cyber risk insurance (though both are needed, and indeed are hard to separate).
- Post-breach (aka remediation) claims will increase, both in frequency and severity. Carriers will have a tough time making an underwriting profit as a result.
- Increasing numbers of carriers will be offering cyber/privacy products, making it tough to achieve rate adequacy (see above).
- As a result, carriers will put more emphasis on claims cost control, negotiating with remediation service providers for lower rates and more efficient delivery. NOTE: insureds can expect fewer choices amongst insurer-approved providers.
- The middle market will be buying a lot more of this product (our recent study of the middle-market prospects for cyber/privacy insurance indicated that 25% of the respondents planned to buy within the next 18 months).
- Distinguishing between products will continue to be a challenge for agents and brokers; wholesalers will be key to getting the right product into the insurance portfolio of middle-market insureds.
- Brokers will add to their cyber/privacy bench depth as client demand outstrips resources.
- As this product line grows, finding enough technical skill to underwrite and manage claims will constrain growth. Where will this talent come from?