Cyber liability insurance is a type of insurance designed to provide financial protection to businesses and organizations in the event of a cyber-attack or data breach. Despite the increasing importance of cyber security and the growing threat of cyber-attacks, the penetration of cyber liability insurance remains low in many countries including Cyprus. For example, in the very mature insurance market of the UK cyber liability insurance is only purchased by 5% of firms.
There are several reasons for the low penetration of cyber liability insurance. One of the main reasons is a lack of awareness and understanding about the nature of cyber risks and the potential financial impact of a cyber-attack. Many businesses and organizations are simply not aware of the extent of the risks that they face, and do not appreciate the need for insurance protection.
Another reason for the low penetration of cyber liability insurance is a lack of standardization in the insurance industry. There is a wide variation in the coverage provided by different insurance policies, and many businesses are not sure what they are purchasing when they buy cyber liability insurance. This lack of standardization can lead to confusion and mistrust and can make it difficult for businesses to compare different insurance products and make informed decisions.
A third reason for the low penetration of cyber liability insurance is the high cost of coverage. Cyber liability insurance policies can be expensive especially for small and medium-sized businesses; thus, many businesses and organizations simply cannot afford the cost of coverage. In addition, the cost of coverage is often perceived as being too high in relation to the perceived risk, which can discourage businesses from purchasing insurance.
An additional factor contributing to the low penetration of cyber liability insurance is the limited availability of insurance products. In many countries, the insurance industry has been slow to develop specialized cyber liability insurance products, and as a result, businesses and organizations may not be able to find the coverage they need. In Cyprus, we are fortunate enough to find cyber liability insurance cover easily and admittedly reasonably priced.
Despite these challenges, there are several steps that can be taken to increase the penetration of cyber liability insurance. This is a main goal of this article. One of the key steps is to raise awareness of the risks associated with cyber-attacks and data breaches, and to educate businesses and organizations about the importance of insurance protection. This can be done through information campaigns, seminars, and other awareness-raising initiatives.
Another step that businesses and organizations can take to increase the penetration of cyber liability insurance is to promote greater standardization in the insurance industry. This could involve the development of standardized insurance products and policies, as well as the creation of common definitions and standards for measuring and managing cyber risks.
In addition, governments and regulators can play an important role in increasing the penetration of cyber liability insurance by creating a supportive regulatory environment. This could involve the development of legislation and regulations that encourage the uptake of insurance, as well as the creation of other incentives to encourage businesses and organizations to purchase insurance. Following the footsteps of regulators in more advanced markets, Cysec, ICPAC, and the Cyprus Bar Association can and should play a leading role towards this direction.
Finally, the insurance industry itself can play a key role in increasing the penetration of cyber liability insurance by developing new and innovative insurance products that are more accessible, affordable, and effective. This could involve the creation of new products that are specifically designed for small and medium-sized businesses, as well as the development of innovative pricing and dedicated, knowledgeable distribution professionals that make insurance coverage more accessible to businesses and organizations.
The low penetration of cyber liability insurance in the local market is a complex issue with a range of causes, including a lack of awareness and understanding, a lack of standardization, high costs, and limited availability. However, there are several steps that businesses and organizations can take, with the support of governments and the insurance industry, to increase the penetration of cyber liability insurance and better protect themselves against the financial consequences of cyber-attacks and data breaches.
Stelios Kaparis
