Category Archives: Middle Market Insureds Research

Cyber Insurance and the SME Market – How SME’s are the Soft Underbelly of the Cyber Security World

WRIN.TV interviewed me recently about the Small- to Mid-sized enterprise and its place in the Cyber security and insurance worlds.  Note that I used the plural, as the two are still way too separate.

This is a topic that is really interesting, as the interconnections of our global economy create exposures where none existed before.  It is my contention that large enterprises need to tighten up their vendor security to have any hope of being secure themselves.

The 1st part of my interview is here: http://www.wrin.tv/small-and-medium-sized-companies-are-soft-underbelly-of-cyber-security/

Part two will focus on the Cyber insurance market for SMEs and should be available later in February; when it is, I will post the link here.

 

Snips from our Private Company Management Liability Insurance Market Survey 2011

We are pleased to let you know that our Private Company Management Liability survey was posted recently at betterley.com.  This Report reviews bundled products that can included D&O, EPLI, Fiduciary Liability, and other executive liability products.  The target market is generally middle market and smaller insureds.

We have selected twenty-three carriers for this year’s Survey, up from twenty in 2010. Newly added carriers include Argo and Zurich; Starr is back after a one year absence.

2011 looks to be similar to 2010, but with a definite firming of rates indicated as the year develops.  While we do not expect any significant increase in rates, discounts are disappearing, and small (5% or so) increases are more common.

The volume of business (gross written premium) is rising a bit, with most carriers reporting total premium growth in the 0-10% range; markets reporting flat or down premiums tend to be the smaller companies, as continuing softness in rates combined with cutbacks in coverage made for an environment in which a carrier was happy just to get as much premium as they did from the expiring policy.  We see support, though, for premiums to resume their climb as insureds recover from the recession.

Based on confidential conversations, we found:

  • Premium growth (2011 projected versus 2010) is rising slightly, accelerating as we get further into the year.
  • Rates are flat or up 5 to 10 percent for good insureds, a bit more (10 to 20 percent?) for the less attractive insureds
  • Deductibles are flat
  • Reinsurance support is stable.

Although carriers continue to broaden the types of coverages they offer the middle market, we believe they are missing a golden opportunity by not offering more coverage options.

Adding more coverage options can be a successful product strategy because MLI policies are an easy sell to insureds and their brokers – most insureds need at least a couple of the core coverages (EPL and Fiduciary).  Adding additional coverages to an existing policy is an easier buy (or sell?) for many insureds, who find it easier to add an option than to buy an entirely new policy.

Many insureds and brokers have told us over the years that they can get internal support for an added coverage option that would have encountered resistance as a new policy purchase.  This was especially true during the recent soft market, when premium reductions freed up budget for additional insurance purchases.

More about lines of coverage soon (or, read the full Report at www.betterley.com).

 

Thoughts about Specialty Insurance for 2011 – Cyber/Privacy products

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?

 

The Middle-market’s Opinion of the Value of an Underwriter’s Knowledge in Cyber/Privacy Insurance

In our recent study of the market for cyber/privacy insurance and services, we asked insureds and prospective insureds about their opinion of the value of a knowledgeable underwriter.  This is an important question in a complex, evolving product like Cyber.

We were surprised, though we probably shouldn’t have been, that the respondents were not all that concerned with the expertise of the underwriter.

Why is this important?  Not only can a knowledgeable underwriter help an insured or a prospective insured understand the risks that are being evaluated, they are also more likely to be a more stable market.  I believe that an expert underwriter who understands the risks is less likely to be surprised when claims arise, as they inevitably do.  A surprised underwriter might react by restricting coverage, dramatically raising rates, or even withdrawing from the market

Naive capacity is not good for insureds, brokers, or insurers.  We’d like to see these middle-market companies place more value on the knowledge of their underwriter, as well as on the knowledge of their broker, when considering cyber insurance.

Here’s the question and the results, as well as more of my comments:Value of Underwriter’s Knowledge

What do you think?

§ Market Penetration and Product Awareness – 9 charts

% of respondents that carry Cyber Risk insurance

Reasons why they don’t buy this insurance

Do they intend to buy it in the next 18 months?

How they learned of Cyber Risk insurance

§ Opinions on Product Features – 27 charts

Opinions about specific product features for both coverage and services

Satisfaction with premium cost

Willingness to pay more premium for key product features

Satisfaction with limits and deductible options

The value of underwriter and broker knowledge

§ Opinions about Cyber Risk Insurers, Brokers, and Service Providers – 7 charts

Which insurers and brokers are insureds and prospective insureds familiar with?

Satisfaction with current insurer?  Broker?

Which service providers are insureds and prospective insureds familiar with?

Number of respondents that have had a claim?  How satisfied are they with claims handling?

The 2 Most Valued Coverages in a Cyber/Privacy policy for middle-market insureds

The following is excerpted from our recently published study Understanding the Cyber Risk Insurance and Remediation Services Marketplace: A Report on the Experiences and Opinions of Middle Market CFOs.

The question asked was (click on the link for the chart and commentary): The 2 Most Important Coverages all respondents.

To view the Executive Summary, please click here.  To purchase the full Report, click here.

Cyber Risk Insurance – Why Middle-market companies don’t buy it (an excerpt from our study of middle-market insureds)

The following is excerpted from our recently published study Understanding the Cyber Risk Insurance and Remediation Services Marketplace: A Report on the Experiences and Opinions of Middle Market CFOs.

The question asked was (click on the link for the chart and commentary): Why Middle Market Companies Don’t Buy Cyber Risk Insurance.

To view the Executive Summary, please click here.  To purchase the full Report, click here.

Cyber Risk Insurance Ownership by Revenue – from our recent study of middle-market senior executives

The following is excerpted from our recently published study Understanding the Cyber Risk Insurance and Remediation Services Marketplace: A Report on the Experiences and Opinions of Middle Market CFOs.

The question asked was: Do you Currently Own Cyber Risk Insurance?  All Respondents by Revenue (click on the link for the chart): Ownership by revenue

To view the Executive Summary, please click here.  To purchase the full Report, click here.