The Expert Podcast

So how important is cyber liability insurance? How big of a deal is it? How big of a market is it? Well, big enough where one company, a single company called Coalition, has recently taken an investment position which puts its company valuation at five billion dollars. For one company, and this is a new company — this company basically started about a year, year and a half ago — and it had a Series F investment, which is a form of investor inflow of capital, which pegs the valuation at 5 billion. The previous investment, which happened last September, pegged it at 3.5 billion.

The company has tripled its customer base from 50-some thousand to 160,000 clients. That's a big deal. 160,000 from under 60,000 clients in a year and a half has seen a 200% increase in revenue growth in the cyber liability market just for that company. Their opinion is it’s a booming cyber insurance market. Some of the players in the market kind of pulled back a little bit, but this particular company and the ones that are successful are finding that tech tools and technical resources help the underwriting process.

If you can use artificial intelligence and technical tools to scour your clients’ networks, to scour the threat profile and the liability footprint, you can do underwriting on these cyber policies pretty well. You don’t need to have manual teams of people looking through documents like you would for other types of underwriting — E&O insurance, fire insurance, liability insurance, general liability insurance — those are very labor intensive and so the premiums reflect that. By using technology instead of human interaction, this company can write cyber policies and keep the market open for many companies.

Cyber is a hard market, very difficult to get coverage overall. According to this article, the market is supposed to be growing at 25% a year for the next few years. Think about any other business that you can think of that grows 25% per year on an ongoing basis. There are a few companies that get a spike, maybe 25% one year or 20% one year, but this is an industry that’s going to grow 25% per year for several years.

This particular company says it has a strategic underwriting advantage by analyzing data, web scans, infosec capability, and through its own claims. They use this data to select better risk but also to help spot and prevent cyber risks for their policyholders. Here’s something we’ve been talking about for a year, more than a year: that the biggest advantage to having a cyber policy is maybe not having the coverage if something goes wrong. Obviously, you want that — if you have a claim, you want to get paid.

The biggest advantage might be preventing it in the first place, and that’s what this company’s trying to do. Look, if it can put in some very robust tools to prevent claims from happening for their insured clients, then they can keep the market open and be able to take on more clients. They can also keep their premiums lower and be competitive. Look, they’re competing against big companies — AIG, Beazley, Hitchcocks — these are big companies. We’ve dealt with all these companies.

If you can compete with them by kind of short circuiting or shortcutting the underwriting process, you have an instant built-in advantage. It’s like being a disrupter because you have basically a new model for how you write cyber risk.

So what does this mean for you? If you are an insurance agency or broker, you want to look at all the markets that are available to you. Are the markets for cyber competitive? If you always run into roadblocks with your insurance getting them cyber coverage, maybe the market that you’re accessing isn’t as mature or advanced or as complex. Maybe they’re trying to use old-school underwriting. Maybe there are other products available.

If you are an insurance broker, you also want to look at how important cyber coverage is for your clients. Look, it may not be as crucial in some ways as fire or general liability, but there’s a higher probability it’s going to happen. The loss could be catastrophic. But on the other hand, if you work with a provider — whether it’s just provider or another one that has some very specific risk mitigation tools — you can help your client more than just giving them insurance. You can keep them from ever having a claim.

What if you’re a business owner? Well, it’s the same thing. You want to look at what markets or what options are available to you. Work with your broker, work with your insurance agent to find out what they have, and ask them, “Are there other markets or companies that are available that you’re not aware of?” Some of these companies might be excess and surplus lines because they’re not admitted carriers in your state, but they may be admitted in other states. You want to see if you have options for coverage.

More importantly, you want to make sure that you follow the requirements or recommendations of that company for preventing a loss in the first place. Look, it’s good practice for you, it’s also a requirement. If you don’t follow the procedures, you might not have coverage. For example, if you had, let’s say, fire insurance and part of your requirement is to have your sprinkler system working, if you don’t maintain your sprinkler system, you might lose your coverage if there is a fire. It’s the same thing with cyber liability insurance.

You have to file the procedures for having backups and passwords and multi-factor authentication. You want to file those anyways because that’s going to help your business look good. Even if you didn’t buy insurance and somehow got a list of the requirements and followed them, that would be valuable as is. But the cost of the cyber policy might be worth having anyways.

Either way, if you’re an insurance company or agency or you’re a private company, let us know in the comments what your thoughts are about having cyber insurance. Do you have coverage? Do you want to have coverage? Do you think it’s a waste of money? If you’re a broker, do you think your clients need this? Are you selling a lot of it? Would love to hear from you, and we’ll see you on the next episode.