Cyber incidents are the most important business risk globally, and businesses both large and small need to protect themselves as much as they can. Cyber insurance can protect entities against these risks by providing a holistic approach that consists of identifying potential areas of attack, providing monetary compensation in the event of an attack, and helping businesses get back on their feet as quickly as possible.
Top macroeconomic trends impacting the cyber insurance industry, as identified by GlobalData.
Growth in business numbers
Currently the cyber insurance (CI) market is focusing products towards the commercial sector. Given this, the number of businesses operating is a key element of the underlying demand in the market. In the UK alone the number of private businesses with 1+ employees grew by 16% between 2012 and 2018 according to the Department for Business, Energy & Industrial Strategy. On a wider scale, the number of active businesses in the EU increased by 28.6% between 2012 and 2017 according to official EU statistics.
However, despite increasing business numbers, growth in the market is yet to reach its full potential. Many new businesses feel they are too small to be vulnerable to cyber risks, and thus believe CI is not appropriate or necessary. About 44% of UK SMEs believe they will not be the target of a cyber-attack according to GlobalData’s 2019 UK SME Insurance Survey, reinforcing this observation. Insurers and brokers should be proactive about identifying areas and industries that may be unaware about CI and educating those businesses about the protection the product can provide.
Shifting consumer behaviour
Consumer purchasing behaviour will play a considerable role in accelerating growth in the commercial cyber insurance market. Developed economies have seen a shift in the purchasing habits of consumers, with moves away from traditional bricks-and-mortar shops towards online retail.
This has resulted in online platforms becoming integral to a business’s success in many markets. GlobalData forecasts the value of the UK online retail market to grow by 29.6% from £57.0bn in 2019 to £73.9bn in 2023. The growing value of the online retail market will clearly make it a target for cyber-attacks.
The falling cost of technology has allowed for global connectivity to increase considerably. This trend will increase both demand for cyber insurance products as well as the exposure faced by insurers.
Changing business culture
With businesses becoming increasingly aware of the importance of data security, established enterprises and data-driven start-ups have started appointing their first chief information security officers (CISOs). A CISO’s role is to protect a company’s assets (both physical and digital) from cyber-attack. Insurers should see the appointment of a CISO as an indication that the business is attempting to increase its awareness of the cyber risks faced and reduce its exposure.
This is an edited extract from the Cyber Insurance – Thematic Research report produced by GlobalData Thematic Research.