Flynn says the market is still dogged by past perceptions of how restrictive and confusing cyber policies were in the early days of the product coming to market
The cyber market is suffering from outdated client perceptions that it is struggling to shake off. That’s the view of Kingsley Flynn, who has more than 40 years of experience working in the Lloyd’s market, and is currently head of insurance at Sayata Labs in the US.
Flynn said that in the early days of the internet, when the cyber market was first being developed, people weren’t fully aware of how the related technological risks would develop - this was to create some problems for the market as it matured.
“Cyber wasn’t even being contemplated as a risk in the 1990s, but a number of clients I worked with at that time were concerned with the emergence of the internet and new technologies,” he said. “They were excited on the one hand about how it would enhance their business, but then people within those organisations started saying they weren’t sure about how it would develop and what new risks that would lead to.
“That scared them, because they didn’t know what the future held.”
Negative perception
This uncertainty meant that early cyber policies often failed to encapsulate the full gamut of cyber risks, which led to some negative perceptions from clients that still hold today, even if they no longer hold true.
“In the early days, many clients looked at cyber insurance as very restrictive and expensive, and thought that policy wordings were unclear,” Flynn explained.
“That created a problem, because as new cyber products were developed, and over the next 10 years the cyber market did become a proper insurance market, client’s minds continued to look back at the past and their initial thoughts of what a cyber product was – restrictive, expensive and unclear.”
Since then, Flynn added that the insurance market has been successful in expanding its horizons to bring in talent from outside the insurance industry to help develop more advanced cyber products.
“The industry has brought in some terrific resources to help them when looking at cyber risks, and those resources have come from outside the traditional insurance sector, whether that be lawyers, forensic accountants or data breach experts,” he said. “Cyber solutions are no longer simply being developed by insurance people and that can only be a good thing for the market.”
Bringing to the mainstream
Despite these developments, brokers still commonly struggle to bring cyber forward to clients as a mainstream product, something that is particularly problematic in the small to medium enterprise (SME) market.
Flynn said: “The biggest risk to insurers as they now try to develop that SME risk is the lack of cyber education of the client, which leads to more human error-induced breaches.
“Brokers need to go through the life of a breach, sit down and walk them through what a breach scenario looks like. You need to demonstrate that if you don’t manage it properly up-front, it can go sideways very quickly.
“The brokers that are able to demonstrate that narrative can deliver a much more powerful message than those who just send over articles or examples of what has happened in the past.”
And Flynn added that the fast changing nature of cyber insurance makes it an exciting market to operate in.
“It is an exciting time for the cyber market, because what we would define as the critical risk facing clients with regards to cyber today, will be totally different in 12 months or even six months time,” he said.
“The key for the insurance market, however, is insurers, brokers and service providers responding quickly to that changing landscape.”
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