Brokers need to seize the initiative in the cyber market…for their own good, as well as their clients’
A recent Insurance Age article reported that Anna Sweeney, director, insurance supervision at the Prudential Regulation Authority (PRA), warned that more ground needs to be covered by firms in relation to cyber insurance risk.
By Michael Whitfield, managing director CPP UK new business
The regulator is particularly encouraging practitioners and product providers to be more proactive and to take more strategic positions in respect of cyber risk management.
“Having been personally active in the insurance broker market in various ways for more than 30 years, the PRA’s review somewhat touches a nerve. Yes, more should be done in terms of insurance providers raising awareness of cyber strategies and products. However, it is with brokers that the real need for action, but also the very real opportunity lies.”
The core role of insurance brokers
I believe that it is a core role of insurance brokers to raise the profile of risk management generally with their SME clients. They have an emerging opportunity to position themselves as the provider of choice in respect of cyber risk management and mitigation solutions and the provision of advice in this space.
There are a range of very interesting new “prevention” type products out in the market, which complement perfectly the established and valuable “after the event” insurance products. Despite some recent criticism I believe that those insurance products are generally well thought through and that the need for their active and ongoing development simply reflects the rapidly changing sets of risks that they aim to protect against.
To remain competitive, insurance brokers have to be able to show their value as the trusted expert advisor of choice for their SME customers. If they fail to do so, they risk the core insurances that currently form the backbone of their income stream becoming vulnerable to those wishing to commoditise those products.
The onward march of commoditisation
Many brokers have shown themselves to be adaptable and resourceful in migrating away from their former reliance on income derived from personal lines products in recent years. Those brokers shouldn’t assume that their current dependency on SME commercial lines business is a safe-haven forever though.
There is an onward march of commoditisation into ever more complex product areas, which is not going to be arrested any time soon. I see propositions coming over my desk from the InsurTech sector on an almost daily basis. Not all of these are ‘game changing‘, but a significant few of these are very, very good and sooner or later some will emerge to form an existential threat to the role of brokers.
A good broker possesses a unique asset that can be used in the fight against commoditisation and as a critically important defence against these new entrants – the provision of accessible and relevant advice. Insurance is all about risk. If brokers can’t convince their clients that they need expert advice in respect of acquiring risk awareness, management and mitigation products, why should the client then believe that they need such advice in respect of the insurance policies that back those risk management products up?
Learning a lesson from our counterparts
Awareness of cyber risk is much higher in some other parts of the world than it is in the UK and Europe and we would do well to take a lesson from our counterparts in North America and the Far East. Brokers need to seize the initiative (and the incremental income opportunity) by moving cyber risk up the agenda for their SME customers.
CPP Group is doing its best to help put approachable and relevant products out there for brokers to use. We already have a great range of cyber risk tools in our kit bag and there are more to come in the months ahead. We genuinely want to work with brokers who understand this. However, for those that don’t see the absolute need to provide added value for their customers I feel that the future may be a bleak one. If the broker sector does diminish because its constituents fail to deploy one of their key assets, that would be much more than just a great shame!