Why pricing still affects brokers’ ability to sell cyber

To the surprise of no one in the broker channel, the ongoing hard market in cyber still plays a significant role in why clients decline to buy coverage.

About 40% of brokers responding to a recent CU survey selected ‘Price is too high,’ when asked to pick among some common reasons why clients say they don’t want to buy cyber insurance. And the fragility of Canada’s post-pandemic economic climate isn’t helping.

“Clients are probably very receptive [to buying cyber insurance],” one broker reported in the survey. “But after COVID and insurance increases, the clients’ main concern right now is survival.”

CMB, an Edmonton-based brokerage, said cyber insurance coverage starts at $550 per year, with the average cyber liability claim coming in at $295,000. “Companies holding financial data or healthcare information can expect to spend $1,000 per year or more,” CMB reports.

Insureon, a U.S. brokerage dealing exclusively with cyber insurance for small companies, added the average premium price for its clients is under US$145 monthly, or about US$1,740 annually.

Brokerages noted the cost of cyber will vary based on several factors, including policy limits, deductibles, cyber threats specific to the client’s industry, the amount of sensitive information handled, the number of employees and claims history.

Changing limits

One Gallagher Re rep told webinar attendees in late 2022 that insurers had started to reduce their cyber policy limits to between $3 million and $5 million — down from $10 million. Meanwhile, cyber premiums were increasing by between 40% and 100% for low-risk clients, and between 100% to 400% for high-risk clients, Aon Canada reported.

Improved loss ratios in cyber meant a ‘more competitive’ cyber market in the fall of 2023, Aon Canada observed in a report. But “insurance costs can be prohibitive for some clients, as insurers are highly focused on control profiles,” it said. “Investing in your cyber hygiene and security controls will not only protect you from future losses, but it is also essential for obtaining favourable coverage terms.”

But as one broker in CU’s survey found, clients looking to save money on cyber could game the system by taking advantage of an underwriter’s strict controls required during the application process.

“They feel if they complete the requirements for insurability, then they are protected,” the broker commented. “Therefore, they don’t actually need the coverage.”

This article is excerpted from one appearing in the February-March 2024 print edition of Canadian Underwriter. Feature image courtesy of iStock.com/ArLawKa AungTun