by Bethan Moorcraft 30 Nov 2020
Insurance brokers could be in for a shock when they approach the cyber market for renewals in 2021. After significant escalation in the frequency and severity of ransomware losses and social engineering scams, the US cyber insurance market has shifted. Carriers across the board are shoring up their underwriting criteria, seeking higher rates, and, in some cases, they’re making significant changes to coverage.
This is a new type of cyber insurance market for many brokers, according to Nick Economidis, vice president, eRisk at Crum & Forster. The tactics brokers used in the softer market of recent years may not get them the best results for their clients in these more difficult times. Economidis added: “If brokers aren’t prepared for the challenges ahead, they’re going to be left scrambling for coverage and dealing with some very unhappy clients.”
To prepare brokers for a hardening cyber insurance market, Economidis offered seven tips that will help them get the best possible cyber insurance terms for their clients:
1. ‘The early bird gets the worm’
Brokers should go to market as early as possible. Gone are the days where cyber insurance underwriters will accept submissions without a grumble a week or two before renewal. In this tightening marketplace, where carriers are enforcing stricter underwriting criteria and seeking more rate, any delays make the whole process rushed and uncomfortable for all parties. Economidis stressed: “The early bird gets the worm. Go to market early and get your renewal submissions in as soon as you can.”
2. Shore up your submissions
In a soft market, it can be easy to fall into “lazy” habits. Economidis reflected: “Some brokers would send all the supplemental applications and all the underwriting materials at the end of the process with the binding order, thinking everything will be fine. Firstly, that’s unlikely to get you the best terms because there are unknowns that will make the underwriter uncomfortable because they don’t have all the information. And you also risk the very real possibility that the underwriter won’t like the responses, and instead of accepting the binding order, will change the terms that they’ve offered or just flat out refuse to bind the coverage. That leaves you scrambling, and that’s not where you want to be.”
Economidis encouraged brokers to work hard to ensure their submission is as complete as possible, particularly when it comes to prior loss information for new business submissions.
3. Send a ransomware supplemental application
With the frequency and severity of ransomware attacks on the rise for businesses of all sizes and sectors, brokers would perform a good service by submitting a ransomware supplemental application “early and upfront,” according to Economidis. That way, the underwriter can provide the quote immediately, rather than having to seek out further information regarding ransomware risk controls and any prior losses.
4. Put your best foot forward
“When applying for insurance, or applying for a loan, or a new job, you have to put your best foot forward because that will get you the best response,” said Economidis. “It sounds simple, but brokers should encourage their clients to fill out the application neatly and professionally. Too often, we get applications that are chicken scratch and clearly filled out very quickly. That doesn’t leave the best impression on underwriters who are increasingly busy in a hardening market. So, put the work in and make sure clients are presenting themselves in the most favorable way.”
5. Avoid ‘shotgunning’ the market
In a tightening marketplace, it’s only natural for brokers and risk managers to shop around for alternative quotes. They want to see if they can secure more favorable policy terms and pricing to what’s being offered by their incumbent insurer. For brokers looking to shop around, Economidis advised taking a “targeted approach” and avoiding “shotgunning”.
“As rates go up, everybody is trying to shop the market, and when underwriters feel like someone’s taking a shotgun approach, they’re a lot less motivated to work on their application. They’ll often either decline because they’re too busy or they’ll offer a sloppy set of terms because they know the odds aren’t in their favor,” he told Insurance Business. “But if you can take a really targeted approach to market, you can get the attention of the underwriter, get their best thought process and get their best terms.”
6. Make the most of mitigation
In difficult markets, the best risks are the ones that have the easiest time. They’re the risks that underwriters will fight over. They’re the accounts at the top of the quality curve that almost never have losses, and can probably be written at almost any price and be profitable because they have exemplary best practice cyber risk controls.
Economidis commented: “Everything a business can do to become one of those exemplary risks, particularly in a hardening market, will be to their benefit. Brokers must encourage insureds to take advantage of all the value-added risk mitigation services that carriers can offer to improve their cyber security posture. That’s probably the best investment a business can make in terms of maintaining an affordable and attractively-priced insurance program.”
7. Encourage a ‘be better’ attitude
There is never a wrong time for a business to implement and improve cyber risk controls. Underwriters will always respond positively to a broker and insured reaching out and asking for advice on how to be a better risk. “That’s a great attitude,” said Economidis. When carriers like Crum & Forster run external scanning tools and provide cyber risk scores to insureds, it’s because they’re trying to “keep them safe” and reduce losses. Economidis added: “We all win when insureds don’t have a loss. When clients are receptive to our feedback, we like that. Brokers should encourage their clients to have a positive ‘be better’ attitude towards cyber risk mitigation and they should promote partnership with the carriers.”