Happy New year everyone & welcome to my ongoing world of insurance. And, it is February already. Some of the hot topics for 2015, according to many of our insurers with stakes in both New Zealand & Australia, land in the cyber arena. Cyber risk will provide a big area of emerging risk & will gain more traction over time.
While disruption to a business following a major incident, such as fire, earthquake, flood, act of terrorism are currently rated top current risk issues in our industry, disruption to a business following a major IT disruption & subsequent loss of data, data corruption, or loss of systems security or website security are fast becoming prevalent concerns.
Directors & management may have heard plenty about cyber risk over the last 12 months, as it is having an impact on many different organisations both globally & locally. No organisation is immune to an attack & many would find it extremely challenging to continue to operate if their systems went down given the huge reliance on technology.
Everyone needs to be aware of the fact traditional insurance policies do not adequately cover cyber risks. Whilst it has been around for some time, it is now starting to manifest in certain areas, & we are seeing it more in medium enterprise… this is definitely an emerging area. However, much education was still to be done on the topic.
I think cyber insurance is a product which really is least understood at the moment. And I also I think it may be the biggest uninsured exposure many clients face ~ & I do not necessarily think many people even understand the consequences to their business of a cyber-attack. In 2014, Sony suffered the most devastating hack of all time. The Heartbleed Bug, along with other large scale attacks on multinational businesses dominated the media.
Certainly there has been a lot of traction over the last couple of years, with the risk exposure increasing, & this is because there are more & more clients who are aware of it. Consequently it has been, & will continue to be a slow acceptance of cover requirements as the awareness & education process continues.
I would however, like to see some sanity in the pricing structure, where I see so many insurers still deciding the best way grow & the premiums they offer into the market. Insurance capacity is still creating uncertainty, however, I also think there is a lot of capacity knocking around at the moment in our marketplace.
My thoughts would still be to keep doing what we are good at & continuing to really understand our customers’ needs & focus on giving the right advice to them. I could say, in a competitive market, there will be temptations to take premiums which may be very attractive, however, from our professional negligence perspective we need to continue to focus on the advice you require & ask, ‘Am I going to get the claim paid?, ‘Am I with a reputable insurer where I am not going to have challenges when it gets to claim time?’
“So I would say focussing on advice, on understanding what insurers your business is with, & then supporting those insurers who support you. Companies especially, should be having discussions with us as to whether perhaps this risk requires incorporation into your risk management & / or insurance plans.
The National Business Review also had another excellent article on this topic over this latest weekend. Boardroom Talk by Henri Eliot & his article: 'Directors cannot hand Cyber security governance over to IT experts'. Should you like to read a copy, email me, I have one available. Finally, I think evolution will continue to be one to watch over the next two to three years. Any enquiries on this topic specifically, or other concerns, please feel free to call me.
Until next time, this is Kenn Butler, wishing you a splendid rest of your summer.