Business interruption insurance is one product that consumers are turning away from, says broker director
Insureds are prioritising cyber insurance as they cut or reduce other forms of cover to keep total insurance costs low, said cyber insurance consultant Richard Hodson.
Hodson was speaking as part of Insurance Times’ Cyber risk: What is it and what does it mean for the sector? roundtable, hosted in association with professional services firm RSM last week (26 January 2023).
He said: “The problem we’re facing now is compounded by the cost of living – everybody’s got increased costs. Cyber premiums are going up, but [they aren’t] hugely percentage wise [for SMEs].
“What [SMEs are] really looking to do is try and make sure their management liability and [directors’ and officers’] (D&O) and the cyber stays there and [instead] they’re looking to cut down on maybe their BI.”
According to Marsh’s report – Global insurance markets Q3 2022: Financial and professional lines pricing declines, published October 2022 – cyber insurance pricing in the UK increased by 66% in the third quarter, following a peak increase of 102% year-on-year in Q1.
Aviva’s SME Pulse survey from October last year, meanwhile, highlighted that 34% of SMEs had no cyber cover, with 18% stating the reason was due to it being too expensive.
Biba’s latest survey – part of its 2023 manifesto published on 24 January 2023 – furthermore, showed that 40% of respondents said that previous insureds are no longer covering their cyber risks.
Hodson added that business interruption (BI) insurance experienced an “absolute pounding” post-Covid, leaving insureds hesitant about whether the policy would respond in the event of a claim.
Market outlook
Considering cost, Matthew Clark, cyber director at insurance advisory firm Partners&, said cyber is the “number one or two” expense for its science and technology clients, as it is “the biggest exposure they carry”.
Read: Royal Mail hit by ‘cyber incident’ that caused disruption to international post
Read: SMEs potentially priced out of cyber cover due to ‘ongoing issue’ of rising premiums
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Chris Lennon, director for sales and development at broker Specialist Risk Group (SRG), on the other hand, said cyber cost is not at the top for SRG’s clients, due to the firm’s book being more industrial or liability led.
He said: “The challenge we’ve got is one of penetration. The fact it is not top five is because all other lines are growing and getting more expensive.
“We’ve got hard market conditions, we’ve got inflationary impacts and we’re trying to – on top of that – say this is something new that you really need to think about and it’s an additional cost.
“The increase in other lines is compounding the challenge of trying to promote something where they’re not already buying it.”
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