Cyber insurance trends to look for in 2021

The cyber insurance industry is rapidly evolving, opening doors for stronger relationships between insurers and policyholders.

The cyber insurance firms that will be ahead of the curve are the ones that offer helpful tools, speak in layman’s terms and collaborate with the cybersecurity sector.

According to recent research conducted by Cowbell Cyber, 65% of small and medium-size businesses (SMEs) are planning to spend more on cyber insurance as part of their cyber resilience plan in the next two years. This comes as little surprise in the midst of COVID-19 as cybercriminals have become more opportunistic, and have developed new tactics to wreak havoc on their victims.

It is critical, now more than ever, for organizations to insure their most valuable assets, which of course includes their digital assets.

As the cyber insurance market evolves, industries of all types are realizing the need for specific, tailored cyber policies to address their unique needs. The coming year will usher in a wave of transformation for cyber insurance. Here are my three predictions on where the cyber insurance industry is heading.

Cyber insurance education will continue to grow.

The cyber insurance industry still has a long road ahead in educating, not only potential policyholders but also agents and brokers. But over the next few years, the educational gap should get smaller. In order to do so, insurers must offer accessible, easily digestible cyber policies for those who aren’t as familiar with cybersecurity, while still ensuring the intelligence and speed behind the policy can keep up with today’s digital landscape.

Businesses are increasingly becoming aware that cyber insurance is a necessity rather than a luxury. Many of them, however, aren’t sure how to select the right policy. In fact, according to research by Advisen and PartnerRe, the top three obstacles to selling and writing cyber insurance are:

Not understanding exposures;
Not understanding coverage; and
Cost.

Having a clearer picture and understanding of exactly what cyber attacks are covered — and what is not — is vital for policyholders. Further, the cyber insurance industry needs to continue getting better at explaining exposures and risks, leading to more transparency overall.

Ideally, the cyber insurance process should be 100% online, eliminating outdated and confusing questionnaires that result in unverifiable assessments. Going into the next few years, insurers will remove unnecessary jargon from policies and deliver an improved experience for both policyholders and insurers. Insurers also will provide helpful online tools for policyholders, which will educate them on the risks that are most threatening to their particular organizations.

Cybersecurity and insurance will develop close partnerships.

Once considered separate industries, the cybersecurity and cyber insurance sectors are growing closer together. This will create some interesting opportunities for both sides. For example, if a company has good cybersecurity measures in place, they’ll likely receive some insurance “coverage credits” akin to earning better auto insurance rates (thanks to driver telematics) when you’re a good driver, you earn better auto insurance rates and options.

Cyber resilience requires both cybersecurity and cyber insurance. In pursuit of cyber resilience, organizations deploy cybersecurity tools for threat protection, detection and mitigation. When an incident actually occurs, they need to be prepared with a response and recovery plan. Technology helps, but cyber insurance mitigates loss in the aftermath of an inevitable breach.

In the future, we will see insurers working closely with cybersecurity experts to provide coverage for more sophisticated attacks such as ransomware, cyber extortion, social engineering and business interruption.

Insurance industry language will become more standardized.

As mentioned above, one of the common reasons why businesses lag in adopting cyber insurance is a lack of coverage understanding. The cyber insurance industry has a lot of work to do in order to establish clarity. This includes dedicating simple terms to refer to each type of sensitive information, whether that be corporate files, health records or personal data.

Both security practitioners and insurers need to deploy clear messaging that illustrates exactly what risks businesses may have and how they can protect themselves. In addition, all stakeholders should work off of a single source of truth, curating policies with the philosophy that technology and comprehensive assessment will deliver the most protection.

The cyber insurance industry is rapidly evolving, opening doors for stronger relationships between insurers and policyholders. The cyber insurance firms that will be ahead of the curve are the ones that offer helpful tools, speak in layman’s terms and collaborate with the cybersecurity sector, empowering policyholders to learn more about the cyber landscape, as it relates to their particular business sector.

Specific Technologies Driving Insurtech Investment in 2024

Understanding the Funding Decline The decrease in funding does not necessarily spell trouble for the insurance sector but instead highlights a strategic shift, the report suggests. “The insurance industry, like many sectors, is focusing on the most promising ventures with substantial insurance potential,” the report explains. “Insurers are directing their investments toward key areas and current trends such as embedded insurance, employee benefits, and cyber risk management. This strategic investment approach signals a forward-looking mindset within the industry.” Three Key Insurtech Trends for 2024 The report identifies three major trends shaping insurtech investments in 2024: Public Insurtech Companies: Financial and Growth Strategies The report also notes that public insurtech companies are prioritizing revenue growth as their main goal. These firms are restructuring their financial strategies to boost cash flow and capitalize on rising revenue streams. Their growth prospects are supported by expanding asset portfolios and strong market demand. “Public insurtech companies are focusing on revenue growth and optimizing their financial frameworks to increase cash flow,” the report states. “The growth potential for these companies is driven by increasing revenue opportunities, broadening asset bases, and a robust market for their services.” In summary, while global insurtech funding saw a decline in 2023, the industry’s focus on GenAI, digital process management, and connected insurance technologies is setting the stage for a dynamic and forward-looking 2024.

Business

Insurer Secures Unanimous Supreme Court Victory in New York Choice of Law Dispute

In the world of sports, a clean sweep, a shutout, or a perfect game is the ultimate achievement. In the legal arena, a unanimous decision from the U.S. Supreme Court is equally rare and significant. In a notable legal triumph, Great Lakes Insurance SE achieved a unanimous 9-0 victory in the Supreme Court on February 21, 2024. This victory follows a protracted legal battle that began in the District Court of Pennsylvania, advanced to the U.S. Court of Appeals for the Third Circuit, and culminated in the Supreme Court’s decisive ruling. Background of the Case: Great Lakes Insurance SE v. Raiders Retreat Realty Company The heart of the dispute was the insurance contract’s clause selecting New York law to govern any future legal conflicts. Although the financial implications of this case were relatively minor compared to the broader marine insurance industry, the insurer’s determination to uphold a crucial maritime legal principle has significant long-term implications for marine insurance. Faced with the insured’s counterclaims—including allegations of breach of fiduciary duty, insurance bad faith, and violations of Pennsylvania’s Unfair Trade Practices Law—the insurer was confronted with serious risks. Such claims could lead to the shifting of attorney’s fees, treble damages, and more, which might normally encourage insurers to settle rather than risk pursuing justice. However, Great Lakes Insurance, supported by The Goldman Maritime Law Group, opted to challenge the Third Circuit’s decision and seek clarity from the Supreme Court. Supreme Court Ruling: A Landmark Decision In a landmark ruling, Justice Brett Kavanaugh affirmed that choice of law provisions in maritime contracts should be upheld by default. This ruling is a major victory for establishing a consistent federal standard in maritime law and avoiding a patchwork of state laws that could complicate marine insurance disputes. The Supreme Court’s decision overturned the Third Circuit’s earlier judgment, which had questioned whether Pennsylvania’s public policy concerns might override the insurance contract’s choice of New York law. By upholding the New York choice of law clause, the Supreme Court eliminated the extra-contractual bad faith claims under Pennsylvania law, thereby ensuring that the dispute could be resolved based on the merits of the insurance claim itself. Significance of the Supreme Court’s Decision This ruling represents a significant advancement in maritime law, affirming that choice of law clauses in maritime contracts are generally enforceable. The decision establishes a clear, uniform legal framework for resolving maritime contract disputes, which will streamline the process and ensure fair adjudication of future insurance claims. Justice Clarence Thomas’s concurring opinion was particularly notable for its criticism of the 1955 Wilburn Boat v. Fireman’s Fund Insurance decision, which had previously influenced maritime insurance law. Thomas argued that Wilburn Boat was incorrectly decided and stressed that a uniform and enforceable set of rules is essential for the development of maritime law. Impact on the Marine Insurance Industry The Supreme Court’s decision sets a “bright-line” rule affirming that choice of law clauses are valid unless there is a strong argument against the selected jurisdiction. By endorsing New York’s insurance laws as a reasonable choice, the ruling supports a more consistent and predictable legal environment for marine insurers. This decision represents a major step forward in maritime law, helping insurers better assess risks, determine premiums, and ensure fair and efficient resolution of maritime insurance disputes.

Cyber insurance trends to look for in 2021