Cyber insurance market set to double by 2020 says City Minister

Cyber insurance arrived at a particularly well-timed moment in the industry; due to the ever-evolving threat of cyber-attacks, it was imperative for insurers to offer flexible but sturdy policies that could protect businesses of all sizes should they be targeted.

And despite criticism stemming from misunderstandings of the nuance of cyber-related insurance products, the outlook for the industry’s future is particularly bright, according to City Minister and Economic Secretary to the Treasury, John Glen.

Speaking at a recent roundtable event held by London Market Group, Glen offered the following on the state of the cyber insurance industry: “the global cyber insurance market is expected to double by 2020 and as a world-class centre for financial services, the UK is in an ideal position to provide that insurance.”

Still, the Financial Times are suggesting that a rise in the number of disputes between insurers and policyholders points to a need for the industry to simultaneously continue evolving with the threat that cyber attacks provide, whilst also understanding the need to provide appropriate cover in the event of a breach.

“The mismatch between what people think they have bought and what they have actually bought is often very significant,” offered Mactavish’s technical director Rob Smart via the Financial Times. “The products are put forward as an all-singing, all-dancing solution to cyber risk, but the reality is more nuanced than that. Cover can be limited to events triggered by attacks or unauthorised activity – excluding cover for issues caused by accidental errors or omissions.”

The FT also quoted Airmic’s Julia Graham recent criticism suggesting that cyber insurers ‘are not offering the breadth of cover that people would like,’ but despite this, fewer cyber claims are denied after reporting when compared to claims for other business-related insurance products. In that sense, the suggestion that claim disputes are on the rise seem primarily to be down to a misunderstanding on what their cyber insurance actually covers, as opposed to a fundamental flaw with the product itself. Given that several months ago, NTT Security reported that 66% of the UK businesses they surveyed were unaware if they even had appropriate cyber protection, it’s clear that there remains some confusion on the subject.

“Pressure is however still growing on businesses to look even more closely at the risks they face from the increased number and variety of attacks,” offered Glen. “In addition, they also must be conscious of the introduction of new data protection laws which impose more transparency of reporting and higher penalties for failure.”