Why the Cyber Risk Market Reminds Me of "The Cannonball Run"

I have to admit I have bias for comedy movies from the 80’s.

One movie I remember fondly from that time period, was "The Cannonball Run" (Disclaimer: The edited for TV version that I recorded on the family VHS recorder...). This story about a wild car race across America in which competitors spared no expense to win always left me laughing. The illegal nature of the event aside, I loved the frenetic pace as participants tried to capitalize on opportunities for advantage and outmaneuver the competition on their way to the finish line in California.

When I think about this movie today, it parallels some of the things that are happening in the insurance industry right now.

The digital world we all live has created new opportunities for carriers with relatively new segments like the cyber risk being a hot spot for the insurance industry. Given the size and scale of the data breaches at companies like TJX, Home Depot and Target – and recently Staples - businesses need to account for potential exposure to these types of events as part of any sound risk management strategy. The result is that a new insurance market has grown up almost overnight (by insurance standards anyway) with cyber liability. In fact, it’s proving to be a profitable endeavor for many carriers.

Cyber liability insurance can cover many things. Simply it provides businesses with financial compensation to address customer/business needs and coverage in the event of a lawsuit arising from a data breach. And with the industry currently having excess capacity to deploy, this is an attractive option for carriers to place bet on to carve out their piece pie. So, like Burt Reynolds and Dom DeLuise, commercial and specialty lines carriers alike are racing headfirst into this market capitalize on a $1B plus opportunity.

However, as carriers jockey for leadership positions in the cyber market, are they doing so effectively? From my view, there are a couple of things carriers keep in mind:

Ask producers/brokers if their clients are covered

While this is a seemingly simple step, a coordinated approach to cross selling and upselling can often be overlooked. Carriers need to tear down operational silos to ensure that these products are being quoted on EVERY submission or renewal with the right appetite and risk profile. Furthermore, they need to equip sales and underwriting teams with tools that empower them to proactively influence and educate channel partners on their latest cyber offerings and be viewed as a go-to market for such offerings.

Ensure adherence to underwriting guidelines

It’s one thing to attack a growth market quickly. It is another to do so haphazardly and at the expense of risk or profitability. With cyber risk lines, carriers must remain vigilant in maintain underwriting discipline to minimize potential exposures to preserve pricing adequacy. Carriers can support staff inexperienced with these lines with technology that guides them do things like determine appetite, apply the right guidelines, analyze exposures effectively, etc.

Prepare for inevitable changes

As carriers continue gain more experience with cyber lines, and market needs continue to evolve, carriers need respond quickly to changes. Given such, carriers need to have an eye on those future changes as they build out the infrastructure to support these lines of business. Furthermore, they need agile solutions that can adapt quickly and empower their organization to adapt to changes in current exposures, regulatory requirements or competitive dynamics.

While there are some front runners in this race, there isn’t a clear winner yet. So as carriers accelerate their growth ambitions in the cyber risk market they need to combine speed with control in order to be crowned the ultimate race leader.