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Expanding the Market for SME Cyber

Cybersecurity / September 24 , 2020

Led by Drew Walter (Ascot), the NetDiligence panel “SME: Moving to a Proactive World” provided a concise picture of current market trends and a clear path forward. Panelists Lauren Tennant Pollock (AXA XL), Sam Kassoumeh (SecurityScorecard), and Rob Rosenzweig (Risk Strategies) convened at the Virtual Summer Summit on July 1, 2020 to summarize trends in the cybersecurity insurance market for SMEs, setting the stage for the SME webinar module scheduled in August.

A quick round-up of pricing trends, given by Rosenzweig, demonstrated how this underpenetrated market is ripening. Since 2000, both stand-alone and bolt-on coverage has become more affordable. At the same time, silent cyber found on other lines has pulled back, as higher losses have driven up claims. Tennant Pollock noted that the uptick in new buyers has also been driven by contractual obligations, as SMEs may find that vendor relationships are predicated on proof of insurance, while Kassoumeh added that increased reliance by SMEs on cloud computing and MSPs create risks that must be addressed. With an estimated 80% of SMEs still operating without cyber policies, these trends should provide a great market opportunity.

At the same time that the market is adding clients, new insureds show sensitivity to the time and effort that purchasing a policy requires. The need to streamline processes has led to a number of changes, including significant reductions in the length of questionnaires. The ability to enhance these reduced data inputs with the use of tech solutions, AI, and risk scores has made the underwriting process faster and more efficient.

These specific changes are further encapsulated in a larger shift. In the SME market, as across the industry, insureds are encouraged to view themselves as a partner rather than a payer. Carriers are now offering pre-breach services, including cyber health checks and access to security scores, as well as access to vendors who can help develop risk management solutions and ensure rapid deployment of experts when breaches occur.

While the range of services developed is impressive, there is still need for increased education to insureds. SMEs are likely to lack dedicated staff in risk management, information security, or even IT, so individuals charged with acquiring policies may help on numerous fronts. Explaining the value of pre-breach services, clarifying the use of data in underwriting, outlining the process of claims adjustment, and describing the role that vendors can play are all necessary yet time consuming. Rosenzweig postulated that this might be a problem calling for a technological solution.

All the panelists predict a bright future in the SME market. Kassoumeh sees demand for better modelling and growth driven by pressure from large organizations on smaller partners. Tennant Pollock envisions better industry partnerships in education and technology coupled with greater access through digital purchase of policies. Rosenzweig forecasts a growth market due to increases in ransomware and work from home, accompanied by a rise in prices to account for mounting loss.

SMEs form 98% of the economy and represent a significant share of insurance claims and losses. As the industry grapples with how to better penetrate this sector, NetDiligence will maintain attention on issues surrounding it. The Virtual Summer Summit continued this work with webinars on August 4: “SME: Claims,” “SME: Risk Management,” and “SME: Pricing and Terms.”

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