Broker 50 face cyber challenge

Broker 50 members were given the chance to show their golfing prowess at the latest event, held at Sundridge Park Golf Club in Bromley.

Congratulations to the winning team of Open GI’s Dave Kelly, Brunel Professions’ Ed Garrett and BJP Insurance Brokers’ Andrew Brown, which had the most points after 18 holes.

Also hats off to Open GI chief marketing officer Nick Giddings, who hit the longest drive and Bluefin head of private equity and corporate transactions Jon Higgins, who got nearest the pin.

The attending broking big hitters might have had a few frustrations to thrash out on the course, as the main topic of conversation was the industry’s continuing struggle with the complexities of cyber insurance.

And if that were not enough, the senior brokers were also warned of the implications of two key pieces of legislation – the FCA’s Senior Managers & Certification Regime (SMCR – see page 15) and the EU’s General Data Protection Regulation (GDPR).

SMCR will make those lower down the ranks, such as divisional heads, as responsible as the top layer of management if something goes wrong. GDPR, which is designed to protect customer data, comes into force on 25 May next year. It means that companies will only be able to use customer data for the use they have agreed with a customer.

The advice to brokers for these two key pieces of regulation is prepare, don’t panic. The sense is that regulators are more interested in weeding out disreputable companies and people, and will not be seeking to punish responsible firms who have taken steps to prepare and are heading in the right direction.

Cyber frustration

Senior brokers were joined by representatives from sponsors Aviva, Davies, Enterprise Rent-A-Car and Open GI to discuss the cyber insurance and the impact of upcoming regulations.

The event closely followed the launch of the inaugural Insurance Times Cyber Product Report, which ranks products based on their coverage and highlights the key challenges facing the industry in selling the product.

It is clear from the report and the Broker 50 discussions that the UK insurance industry as a whole is still finding it difficult to get to grips with cyber insurance.

While the product is relatively mature in the US, the UK cyber market is still in its infancy and there is still much confusion in the market, not only about the available products, but also what falls under the scope of cyber cover.

This is not helped by the fact that many in the market, possibly influenced by the early US cyber market, still refer to the product as “cyber liability”. While the US market built itself around third-party liability cover for data breaches, the biggest need in the UK market is first-party coverage for risks such as business interruption and reputational damage.

‘Fraught with danger’

There is a sense that the quality of the cover available in the UK market varies greatly, and there are some risks, such as reputational harm, that are not always well covered by the products available on the market.

Given the confusion about what is available and how it works, the big challenge for brokers is being able to explain cyber insurance to clients. One of the attendees said: “It is a very difficult market and how we explain that to clients is fraught with danger.”

All this means that even if a broker can persuade a client that they need cyber cover, picking the right coverage for a client is tough, and there is a risk of mis-selling.

Even when a customer has bought the cover, responding to claims presents a further challenge. Response time is key for many cyber risks. Brokers need to respond to claims notifications in a matter of hours, or risk a modest claim escalating into a large one.

The good news is that, with the recent high-profile cyber attacks, more and more businesses are becoming aware of the need for cyber cover. This is a big opportunity for the industry. The brokers that can get to grips with the complexity of the market and guide clients through it are likely win respect and business.