As the internet continues to connect us in new ways, adding convenience to our daily lives, it also opens new doors for criminals. Bank robbers no longer need to plan elaborate, Ocean’s Eleven-style heists. Now they can pilfer a bank vault in their underwear, without leaving their living room.
Responding to this new type of risk, the insurance industry offers a variety of cyber liability insurance policies. Originally developed for large organizations with highly sensitive health and financial information such as banks and hospitals, cyber liability is an increasingly important policy for all businesses. Unlike lines with well understood exposures, like general liability, cyber policies are constantly evolving and have very little standardization.
There are many reasons to discuss cyber liability with your clients, including:
For most agencies, the most expensive part of writing a policy is finding the prospect (acquisition cost). Cyber liability is a great opportunity for cross-selling. With stand-alone policies starting at $750, and most policies in the $1200 to $1500 range, these opportunities can add up into significant growth for an agency’s book of business. The best part about using cyber liability as a cross-selling opportunity, is that there is no additional cost to acquire these customers, so the revenue generated goes further.
Finding opportunities for cross-selling cyber liability is easy. Does your insured do any sort of business online or accept credit/debit cards? Do they process, transmit, or store personal information (including emails, names, or addresses) of their customers? Would their business be impacted if they were hit by a ransomware attack and all of their computers were rendered inoperable? If so, then they have exposure to a data breach.
Does your insured have several hundred thousand dollars in a savings account? Do they have relationships with computer forensics teams, lawyers specializing in privacy law, and public relations firms specializing in crisis management? If not, they could materially benefit from a cyber liability policy.
Do they already carry data breach limits as an endorsement on a BOP? Then they may value the coverage and have needs that would be better met by a stand-alone policy which covers more hazards and offers higher limits.
Account retention is a crucial factor for a healthy book of business. At an average agency, it takes 50 contacts to schedule 10 appointments, those 10 appointments convert into 7 quotes, and those 7 quotes convert into 1 policy. Renewing one policy saves you the time, effort, and revenue that would have been invested in replacing it. Adding cyber liability into the insurance portfolio of your clients will drive account retention in two ways.
With multiple policies to manage, it is more difficult to shop around. When friction is added to the process, some insureds just prefer to focus on running their business rather than hunting for marginal savings.
A portfolio including cyber liability also makes it more difficult for a competitor to offer comparable coverage at a lower premium. Instead of having to find one market that will offer better terms than the incumbent policy, a potential competitor must either come in lower on all lines, or so much lower on one that it outweighs the rest of the portfolio staying the same or increasing. This is a high hurdle to get over, and will directly lead to increased account retention.
Outside of the many benefits to the agency, cyber liability protects insureds from a new frontier of risk. The majority of attacks target small businesses, and for every 5 small businesses that are hacked, 3 will go out of business within 6 months. While many small business owners think that they are too obscure to hit the radar of the hackers, they are mistaken. Cyber criminals see small businesses as a low risk, high reward target. Rather than targeting a specific business, they often use software to scan networks for vulnerable systems and identify easy targets.
Cyber liability offers several layers of protection. Many carriers have made available to their insureds services like the eRiskHub which offers free and reduced-price services to help business owners proactively manage their data security. Insurance carriers also have relationships with specialists who can handle the fallout from a data breach. When a breach happens, every minute costs, and having the right team already in place can be the difference between a business being able to keep its doors open or having to go under.
Discussing these scenarios and policy benefits with your insured will show them you are looking out for their interest. Even if they don’t make the decision to obtain cyber liability protection, they will know that you are actively managing the risk they face.
Cyber liability brings a lot of value to the table, both for the agency that sells it and the client that buys it. While some may be afraid of delving into unfamiliar policies, for the bold it offers opportunities to drive agency growth, increase retention, and differentiate your services from the competition.