August 15, 2019
Partners and Cyber: To Affinity and Beyond!
by Brian Specht
Insurers can work with common business services, like cloud-based accounting, to embed a cyber policy right into the business contract.
The joke about cyber insurance is that if you’ve read one policy, you’ve read… one policy. As an emerging, yet vital, form of insurance, cyber has not yet become standardized in terms of the coverage offered. This puts a heavy burden on businesses to rigorously analyze cyber policy options to pick the one that best fits their needs. Vetting countless different policies can be daunting, especially for small and midsize businesses (SMBs) that lack the resources of major corporations. And with the cost of cyber breaches expected to hit $6 trillion in the next few years, this task could not be more important.
Insurance companies with stand-alone cyber offerings are working to make policies more accessible for SMBs, which are traditionally underinsured or uninsured for cyber, so that these businesses have a plan in place to survive a breach. While insurance agents play a critical role in the insurance market — businesses need an agent to talk them through how this form of insurance operates and answer any questions that they may have about coverage — we need additional methods to bring cyber coverage to more businesses. There is a fundamental distribution issue that needs to be solved, so that all SMBs have easy access to policies that apply to them.
See also: Tips for SMBs Buying Cyber Insurance
Affinity partnerships, where a customer provides insurance products to its clients or membership, offer a clear and effective solution to this problem. By partnering with business services, professional organizations and brokers, insurance companies can begin to close the cyber insurance gap for SMBs. Insurance companies need to work with the groups that businesses trust most so that procuring a vetted cyber insurance policy is as easy as clicking “yes” on a form. Additionally, these organizations help businesses cut through the mass of policies to find the one that best fit their needs.
Other classes of insurance excel with this model. As an example, shared work spaces that cater to young professionals entering the workforce have solved a common insurance conundrum by seamlessly integrating general liability and renters insurance into the lease. Cyber insurers can do the same with common business services, like cloud-based accounting or invoicing services. Insurers can partner with these larger organizations to embed their cyber policy right into the business contract.
Lawyer or medical associations are another good example. They often review policies and services so that they can provide sound recommendations to their members. By working with an association to provide it with the policy that best fits its members or customers, insurers can help small and midsize businesses forgo the burden of reviewing many different policies. These organizations, as experts in the field, will help businesses opt into the cyber policy that fits their needs to ensure they have coverage.
Affinity cyber programs can also offer businesses the comfort of a community. Organizations make things easier for member businesses by educating them on cyber risks and insurance terms that are specific to the coverage that “people like me” generally need.
Working with brokers is an important aspect of an affinity strategy. There are around 29 million small businesses in the U.S., and most are drastically uninsured and underprotected. Brokers serve a wide number of clients, and, by partnering with brokers to design the coverage that best meets the needs of an affinity sponsor, insurers can reach many businesses through one partnership.
A key challenge that insurance companies will face as they develop affinity strategies is education. With the average cyber attack of an SMB estimated to cost $160,000, many businesses that are the victim of an attack do not survive. But, just 33% of SMBs have cyber liability insurance. What few SMBs realize is that larger corporations often require cyber insurance to do business with smaller organizations, and it can be a surprisingly affordable and accessible line of insurance for SMBs. Insurance companies need to first work to educate professional services, professional organizations and brokers on the importance of cyber insurance to develop affinity partnerships.
See also: The New Cyber Insurance Paradigm
Affinity organizations and SMBs will be looking for insurance partners that most effectively solve cyber risk. These groups will look at cyber insurers to see if they can provide broad coverage, quickly and accurately assess risk and offer prevention and monitoring tools, all at a competitive price.
By working to educate groups on the importance of cyber insurance, and by forming affinity partnerships, insurance companies can help SMBs better manage their cyber exposure.
Cyber attacks are not a matter of “if,” but of “when.” As the market for cyber policies increases and develops, insurers need to reach as many businesses as possible, and affinity partnerships can help close this gap and get SMBs covered.