The cyber insurance market is projected to grow 25-30% on an annual basis, with some estimates placing total direct written premiums at $23B by 2025.
It can't be overstated that available capacity from (re)insurers will play a critical role in ensuring there is adequate capital to support this growth. But with new capacity entering the market, not to mention Insurance-Linked Securities emerging as a promising form of alternative capital, the stage seems to be set for the industry to deliver on these growth projections.
Much of the market's recent growth has been driven by significant rate increases in response to heightened ransomware activity. With rates now largely stabilized, where will this growth come from?
Many point to small-medium sized enterprises (SMEs), the vast majority of which do not purchase cyber insurance or are underinsured. Despite growing concern among smaller enterprises and evidence showing the need for cyber insurance, there is still a lack of coverage. Consequently, the projected growth of the cyber insurance market suggests there is an opportunity for brokers to drive greater cyber insurance uptake among SMEs. The question then becomes: how can they do so in an efficient and profitable manner?
In this blog, we’ll explore the reasons for the cyber insurance gap among SMEs and how brokers can play a pivotal role in unlocking a critical aspect of the cyber market’s future growth.
Why is the SME segment so largely untapped?
Many small businesses don't believe they have a meaningful exposure to cyber threats, often preventing cyber insurance from truly entering the risk management conversation. In reality, threat actors take the path of least resistance, and with smaller companies typically lacking the resources needed to adequately protect their assets, they present as attractive opportunities from which to launch larger attack campaigns.
Others may believe they are indeed transferring some of their cyber risk as part of a Business Owner’s Policy (BOP) package policy. However, this sublimited coverage is highly restrictive and falls well short of the important benefits offered through a standalone cyber program.
However, perhaps the greatest hurdle in addressing the cyber insurance gap among SMEs is the issue of time to value. Simply put, it is difficult for brokers to justify the time and resources required to facilitate these smaller placements when the resulting revenue is often nominal. This lack of ROI forces many brokers to allocate resources to what they understandably perceive as more meaningful opportunities for the business.
Technology and analytics offer a compelling solution to these challenges, opening the door for brokers to revisit the profitable growth potential in this space.
The role of partnerships in driving growth
Partnerships can serve as an attractive lever for brokers to gain efficiencies and drive additional value across their book. For example, rating platforms allow brokers to quote and propose business in a matter of minutes, and analytics in the form of financial loss modeling can educate businesses on the severity of cyber by assigning dollars to the risk.
Combining these two elements results in a promising avenue for growth, achieved by streamlining the overall placement workflow while also introducing an important education element.
Taking this a step further, imagine being able to instantaneously generate a quote proposal alongside a data-driven limit recommendation all within the click of a button. Now imagine scaling this action across hundreds or thousands of accounts, and the growth opportunity quickly comes into view.
SMEs and the case for automated analytics
The right cyber risk analytics partner will bring this capability to life through API connectivity and strategic technology partnerships. Powered by Broking Manager, CyberCube’s technology partnerships — such as with mShift — allow brokers to seamlessly compare their clients’ financial exposure to cyber events against proposed limits, offering a clear and concise view on effective risk transfer strategies. Other brokers will have integrated this data directly into natively-built platforms to achieve similar outcomes.
In both cases, the result is less time spent on servicing each placement and a buyer with a clearer picture of the level of insurance needed to protect their bottom line.
CyberCube's API-enabled Broking Manager solution and strategic technology partnerships will enable brokers to accelerate client engagements and optimize margins on SME placements. With improved workflows and simplified data that is easy to access, automate, and scale, the path to profitable growth is well within reach.
