The business of insurance is one of risk management — of reducing risk, mitigating loss and making people and entities whole again.
Previously, all risks were traditional in nature. That changed, as the world continued to change. Two decades ago, there was a nascent Internet that was largely undeveloped. In the succeeding 20 years, it has grown, along with a level of interconnectedness in everyday life that was previously unfathomable.
As a result, a broad array of new risk is requiring us to start viewing the world from a cyber perspective. Being interconnected means there's increased risk. One of the most important protections against any risk is insurance.
In 2016, the size of the global cyber insurance market was valued at $3.4 billion. But by 2023, it's expected to balloon to $16.9 billion, after seeing a compound annual growth rate of 20% in the interim, according to a report by P&S Market Research.
In a recent report, Lloyd's of London said a global cyber attack could result in damages of as much as $121.4 billion in an extreme event, comparable to the economic losses caused by Hurricane Katrina in 2005. But serious cyber crimes that affect our clients happen all the time.
|Smarter criminals
One reason that cyber crimes are increasing is that cyber criminals are becoming more sophisticated and better organized. The stereotype of a cyber perpetrator being an overweight thirtysomething still living in his parents' basement spending all of his time hacking into critical systems is no longer accurate (if it ever was). Cyber crime today is big business. That's prompting individual cyber criminals to organize themselves into sophisticated international criminal cartels. The threat has been globalized.
News reports of cyber attacks have focused on big events involving large corporations and public entities. This has contributed to a lack of understanding on the part of many small and midsized business owners and operators that they, too, can suffer cyber-related losses. Small businesses are at risk — and not just from data breaches.
Related: WannaCry and the dawn of large-scale business interruption
|7 primary cyber exposures
PIA believes that small businesses have seven primary cyber exposures:
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Fraudulent funds transfer.
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Extortion and ransomware.
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Social engineering.
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Business interruption.
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Data breach and privacy.
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Network security.
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Website media liability.
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It is imperative that independent agents have the same level of expertise and competence about cyber that they have with other areas of risk and insurance. Their clients expect it. That's why PIA National joined together with our carrier council, The PIA Partnership, to unveil a new, comprehensive educational resource: Cyber 101, available to PIA members and agents appointed by carriers participating in The PIA Partnership. In addition to the many educational resources available through the Cyber 101 website, agents can use the website to access additional cyber resources made available directly through these carriers.
The twin trend lines of cyber threats and the need for cyber insurance are headed in the same direction: up sharply. This is being driven by the inexorable spread of the Internet of Things (IoT). More devices with Wi-Fi capabilities will be relaying information over the Internet — including sensitive financial and personal data — and sharing that information with other devices.
As bad as they are now, cyber attacks are only likely to increase, making it all the more important for independent insurance agents to have the knowledge and the tools they need to help their clients protect themselves.
Current PIA Partnership companies include: Central Insurance Company, Encompass Insurance, Erie Insurance, Liberty Mutual Insurance, MetLife Auto & Home, National General Insurance, Nationwide Independent, Progressive Insurance, Selective Insurance Group, State Auto Insurance Companies, The Hanover Insurance Group, The Hartford and The Motorists Insurance Group.
Mike Becker is executive vice president and CEO of the National Association of Professional Insurance Agents. He can be reached by sending email to [email protected].
The opinions expressed here are the writer's own.
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