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Celent Study: Most Small Businesses Still Unclear on Importance of Cyber Insurance

The coronavirus quarantine is putting employees from all sorts of business to work at home, frequently on their own electronic devices – a trend that increases a business’s exposure to cyber risk. Yet while companies of every type and size are vulnerable to a cyber incident – and most realize it – many smaller firms don’t understand how critical it is to have cyberinsurance to help mitigate the risk, according to a new study by Celent of more than 400 small and midsized businesses.

“More than 60% of small business owners are not very familiar with cyber insurance coverage -- and many believe the exposure is covered in their standard insurance policy,” says Karlyn Carnahan, head of the Americas property casualty practice for Celent, and author of “Voice of the Cyber Insurance Buyer: Asking the Buyers Their Motivations, Product Needs and Experiences.”

“This is particularly relevant today as many businesses enact work from home procedures -- and in doing so, open themselves up for even more threats,” she adds.

The cyber insurance market has grown substantially since 2015, giving commercial insurance buyers time to develop perceptions and opinions of existing products and services. Yet the Celent study indicates a wide range of understanding across small and midsized businesses.

Key findings include:

  • Buyers understand what drives cyber risk, and most had experienced attack incidents. Across all respondents, 58% reported at least one cyberattack in the previous 12 months. The average number of attempts in the last 12 months per company was 1.27, with every company experiencing a little more than one incident. Not surprisingly, the experience of an attack drives the perception that they are a target, while those that did not experience an attack do not consider themselves targets.
  • Respondents displayed varying levels of awareness about cyber insurance. Seventy-five percent of middle market companies were familiar with it, while the majority of small businesses, 61%, were not.
  • Buyers value agent/broker involvement. For midsized businesses, 47% said that their choice of cyber insurer was based on an agent recommendation; 28% of small business used the incumbent insurer on their other business insurance policies. Seventy-five percent of respondents said they could not identify anything their representative could have done to improve the experience.
  • Online cyber insurance sales are still relatively rare. Although only 26% of small and 18% of midsized businesses said they would buy cyber insurance online, small business respondents under age 55 were the largest group that are “likely” or “very likely” to buy cyber insurance online.
  • Businesses understand the need for coverage. Respondents understand the key cyber risk drivers, and identify employees as a significant risk factor. Eighty-seven percent of respondents stated that their employees use personal electronic devices (e.g., mobile phones, computers, etc.) loaded with company information. Exposure from employee activity and phishing led the list of the types of attacks experienced by survey respondents.
  • Respondents recognize the need for cyber insurance evolution. Over half of respondents said their need for cyber insurance would increase in the next five years. Another 30% said coverages needed to evolve as cyber criminals gained sophistication and technology capabilities increased.
  • Buyers say they need more education on cybercrime and cyber risk management. This represents a great opportunity for insurers to forge stronger relationships with their cyber risk customers, Carnahan says.

“Workplace changes due to the coronavirus quarantine make this a good time for insurers to launch a special initiative with their agents for their larger accounts – and a good time to send out communications to small businesses,” Carnahan says.

These findings, coupled with the coronavirus’s work-from-home necessities, provide insurers with a good opportunity to conduct customer outreach and education, Carnahan says.

To read the full report, go to https://www.celent.com/insights/870478918.


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