How Retail Agents Can Avoid Cyber Fatigue in an Evolving Marketplace

The cyber insurance landscape has transformed at an astonishing pace. What began as a niche product in the late 1990s has grown into a critical component of risk management for businesses across the globe. However, as the market has expanded, so too has the complexity of underwriting, leaving many retail agents grappling with what can be described as “cyber fatigue.” This phenomenon—marked by weariness, frustration, and a reluctance to fully engage with the intricacies of cyber insurance—can lead to significant risks for both agents and their clients. But there are ways to combat this fatigue and ensure that clients receive the comprehensive coverage they need.

The Evolution of Cyber Insurance

Cyber insurance has come a long way since the first policy was written in 1997. From a modest beginning, the market has exploded, with premiums skyrocketing from $600,000 in 2010 to over $10 billion in 2021. This growth shows no signs of slowing down, with projections estimating the market will reach $23 billion by 2025, growing at an annual rate of 20%.

The speed of change in the cyber insurance market is nothing short of remarkable. Between 2021 and 2022, premiums for cyber coverage surged by 79%. These increases are driven by the evolving nature of cyber threats and the rapidly changing landscape of risk assessment. Unlike traditional insurance products like property coverage, where carriers have decades of data to guide underwriting decisions, cyber insurance is still a relatively new frontier. The fast-paced evolution of cyber threats means that premiums, coverage options, and underwriting practices are all in a constant state of flux.

The Rise of Cyber Fatigue

Given the volatility of the cyber insurance market, it’s no surprise that many retail agents and their clients are experiencing cyber fatigue. This fatigue can manifest as a reluctance to engage deeply with the complexities of cyber insurance, leading to a “check-the-box” mentality where minimal coverage is obtained to satisfy perceived requirements without a thorough understanding of the risks involved.

For clients, cyber fatigue can lead to a dangerous temptation to choose the least expensive policy or stick with a familiar insurer, without fully considering the adequacy of the coverage. This approach can be particularly risky in the context of cyber insurance, where the potential for catastrophic losses is high.

The Cost of Cyber Fatigue

The consequences of cyber fatigue can be dire. Consider the case of a small accounting firm with less than 50 employees that recently suffered a cyberattack involving both malware and ransomware. The firm believed it was adequately protected by its cyber insurance policy. However, in an effort to reduce costs, the firm had recently switched from a standalone cyber policy to a less expensive rider on its general liability policy.

Unfortunately, this new policy did not cover the type of attack the firm experienced. The malware was found to have been present on the company’s network before the new policy was purchased, and the policy did not cover preexisting attacks. Additionally, the policy only covered third-party damages, while the firm faced first-party damages due to the ransomware. As a result, the firm was forced to cover the costs of the attack out-of-pocket, a financial burden that can be crippling for a small business. In fact, 60% of small companies go out of business within six months of suffering a cyberattack.

Cyber Coverage: Not One Size Fits All

As the accounting firm discovered, not all cyber insurance policies are created equal. Low-cost riders or direct cyber policies often provide limited coverage, typically only addressing third-party damages. However, the risks posed by cyberattacks extend far beyond third-party claims. Malware can destroy a business’s network, ransomware can halt operations, and a breach originating from a third-party vendor can lead to costly disruptions.

Standalone, full-coverage cyber policies offer protection against a wide range of both third-party and first-party cyber risks. These policies can cover everything from data restoration expenses and lost business income to reputational harm resulting from a breach. However, each policy has its own nuances, and it is essential to thoroughly evaluate each one to determine which best fits a client’s needs.

Understanding the Scope of Risk

Navigating the complexities of cyber underwriting can be a daunting task, but it is also an opportunity to gain a deeper understanding of the risks involved. Cyber insurance underwriting is, at its core, a process of risk assessment. The goal is to evaluate an insured’s vulnerability to a cyberattack, which requires a thorough understanding of the client’s cyber risk profile.

Often, high premiums are a reflection of the insured’s lack of cyber protection. For example, a business that has not implemented multi-factor authentication (MFA), adopted a cybersecurity framework, or developed a vendor risk management program is likely to face higher premiums. However, these deficiencies also present an opportunity for improvement. By addressing these gaps, a business can reduce its risk and potentially lower its insurance costs.

Beyond Coverage: The Total Value of a Cyber Policy

Cyber insurance is not just about financial protection; it’s about business protection. A comprehensive standalone cyber policy offers more than just coverage for losses. Many policies include valuable services designed to reduce the likelihood of an attack and minimize the impact if one occurs. These services can include network vulnerability scans, ongoing network monitoring, data retrieval support, ransomware negotiation services, business interruption support, and software restoration and replacement.

By providing these services, insurers have a vested interest in minimizing risk and often work in partnership with insureds to reduce the threat level. This proactive approach is essential in a world where cyber threats are constantly evolving.

Fighting Cyber Fatigue with Expertise

Overcoming cyber fatigue is not something agents need to do alone. Partnering with DOXA, which is well-versed in cyber insurance, can make a significant difference. Experienced brokers at DOXA can add value to the cyber insurance placement process in several ways:

• Understanding the Insured’s Risk Profile: DOXA brokers know what underwriters are looking for when evaluating cyber risks. They can help agents understand their clients’ risk profiles and set appropriate expectations about coverage and pricing.
• Identifying the Best Possible Carriers: With extensive knowledge of the market, DOXA brokers can identify the best carriers for specific clients. Some carriers may specialize in certain industries or sizes of businesses, and DOXA brokers can match clients with the most appropriate insurer.
• Explaining Coverage and Benefits: Cyber insurance policies can be complex, with various coverages and exclusions. DOXA brokers can help agents and clients understand the nuances of different policies, ensuring that the chosen coverage meets the client’s needs.

Bottom Line

Cyber insurance is a vital component of a modern business’s risk management strategy. However, the complexity of the market and the rapid evolution of cyber threats can lead to cyber fatigue, tempting agents and clients to settle for minimal coverage. This approach can leave businesses vulnerable to devastating risks. By partnering with experts like DOXA, agents can overcome cyber fatigue and ensure that their clients receive the comprehensive coverage they need.

Don’t let cyber fatigue compromise your clients’ security. Reach out to DOXA today to learn more about the cyber insurance market and how we can help you navigate this complex and ever-changing landscape. Together, we can protect your clients from the ever-present risk of cyberattacks.