A Broker's Guide to Cyber Risk Client Communication
Cyber risks pose one of the biggest threats to businesses of all sizes and industries. In fact, the Allianz Risk Barometer of 2024 cited cyber as the number one global risk.
Cyber poses a high risk due to its relatively youthful nature in the risk and insurance landscape. To make matters worse, cyber threats are dynamic in nature. The risks are constantly evolving due to the advancement of technology and growing numbers of bad actors who intend to cause harm.
Most companies try to buy the necessary insurance to protect themselves from these risks. However, with the ever-changing nature of cyber, it is still difficult for companies to rest assured with their level of protection.
The Cisco/Cybersecurity Ventures "2022 Cybersecurity Almanac" predicted that the cost of cybercrime will hit $10.5 trillion by 2025. If an organization doesn’t take the necessary actions to mitigate growing cyber risks, it’ll leave them susceptible to significant financial losses and reputational damage.
Amidst this reality, many organization’s risk managers look to their broker partners to guide them through their cyber risk mitigation and give them insights into the cyber risk landscape. In this blog, we delve into strategies for brokers to effectively communicate and guide their clients through the evolving threats posed by cyber risks.
Show a complete understanding of the client’s business
Recognizing the distinctive nature of each company is paramount for brokers. Every business, even those within the same industry, possesses a unique set of characteristics and challenges. Brokers must carefully consider a company’s industry, operations, and risk appetite. By delving into these intricacies, brokers can tailor discussions to address the company's unique vulnerabilities and concerns. This personalized approach ensures a more accurate risk assessment and allows brokers to provide targeted and effective risk management strategies, fostering a client-broker relationship built on understanding and tailored solutions.
Conduct a risk assessment with your client
Guidance from brokers should extend beyond mere insurance procurement. Brokers should work with their clients to conduct a comprehensive cyber threat assessment. This evaluation should include a detailed analysis of their cyber risk profiles and existing defensive protocols. There are various tools and assessments that brokers and risk managers can use to identify vulnerabilities and potential entry points for cyberattacks.
When conducting this cyber threat analysis, it’s essential to consider the nature of the business, the data handled, current cybersecurity measures, vulnerability assessments, and compliance with industry regulations. A profound comprehension of these factors equips brokers to propose coverage and risk mitigation tactics tailored precisely to the unique needs of the client.
Highlight potential impacts and consequences
At times, understanding the risks requires more than just hearing about them; individuals need to see the potential impact themselves. This is why highlighting the tangible risks of cyber incidents is essential for fostering an understanding of the critical need for preparedness.
To emphasize the importance of robust cyber risk management, brokers must illustrate the potential consequences of cyber incidents on their client’s business, from financial losses, reputational damage, operational disruptions, and regulatory fines. Only then can clients grasp the real-world impact on their business.
Brokers should use case studies or real-life examples of cyber incidents within the client’s industry to emphasize the significance of effective cyber risk management. These real-life scenarios serve as poignant illustrations, offering a clear picture of the vulnerabilities at stake. Furthermore, showcasing instances where cyber insurance and effective risk management strategies have successfully mitigated damages becomes a powerful tool in demonstrating the practical benefits of proactive preparation, investment in comprehensive cybersecurity measures, and cyber resilience.
Use data to illustrate points
Another useful strategy brokers can utilize is to use data to illustrate their points. Data is an invaluable tool to help clients visualize cyber losses and benchmark to see how they stack up against their peers. This process becomes streamlined by leveraging LineSlip's cutting-edge analytics tool, Peer Comps.
Peer Comps enables brokers and insureds to compare insurance programs against industry peers with respect to limits, retentions, and premiums by line of business. With Peer Comps, brokers can have data-backed conversations with clients about tailoring cyber coverage, negotiating better terms, and optimizing risk transfer structures.
Provide a couple of cyber insurance options
In an increasingly complex cyber risk landscape, businesses turn to cyberattack insurance as a crucial shield against diverse threats like insurance data breaches, phishing attempts, social engineering fraud, malware, and ransomware. GlobalData, a leading data and analytics company, forecasts that the global cyber insurance market will grow into a $20.6 billion industry by 2025.
Educating clients on the intricacies of cyber insurance options becomes paramount for effective risk mitigation. Brokers need to lay out the different options clients can choose from. They should explain the difference between first-party and third-party coverage. Brokers should also go over policy coverages, exclusions, retention options, limitations, and how specific policies align with their client’s risk profiles and exposures. Brokers must ensure that the coverages they present address the client’s particular challenges for their industry.
Before presenting the different cyber coverage to their clients, brokers should do their homework and compare the policies from multiple carriers. Only then can brokers guarantee that their clients receive the most comprehensive coverage at the best rates.
Work with clients to create cyber incident resilience plans
Building cyber resilience doesn't happen by chance — but rather by choice through strategic planning and execution. One way to build resilience is by creating a robust capability to respond to cyber incidents.
Brokers must collaborate with their clients to build out cyber incident resilience plans so that when an incident does occur, the company can respond and recover quickly. The cyber incident resilience plans should include a comprehensive assessment of potential cyber security threats and vulnerabilities and the development of effective response strategies. Together, brokers and clients should outline clear protocols for detecting, responding to, and recovering from cyber incidents. This includes defining roles and responsibilities within the organization, ensuring employees are well-trained on cybersecurity measures, and establishing communication channels for swift response. When creating these plans, it's crucial to account for the possibility of adverse events occurring simultaneously or in rapid succession.
By creating resilience plans, brokers enable their clients to navigate the complexities of the cyber threat landscape with confidence, minimizing potential damages and ensuring a resilient stance against unforeseen cyber challenges.
Regularly educate clients on the cyber threat landscape
Brokers should establish themselves as reliable advisors, providing valuable insights into the ever-changing realm of cyber threats for their clients. Keeping clients informed about emerging strategies and technologies to mitigate cyberattacks and stay abreast of new regulations is crucial.
Oftentimes, when a cyber-focused carrier writes a risk, they are typically willing to offer loss control services, offer insureds training on breach preparedness, etc. Brokers should mediate discussions between their clients and the insurance carrier they choose. They need to ensure their clients are aware of and use all resources made available to them by the carrier.
If possible, brokers should also connect their clients with industry experts who can provide more insights on enhancing current cyberattack prevention protocols.
Actively encourage clients to have proactive cyber risk management in place
Brokers should encourage their clients to have a proactive approach to cybersecurity, not a reactive one. It's essential to consistently emphasize and advocate for strong cybersecurity protocols (such as 2FA Multi-Factor Authentication), ongoing employee training programs, diversification of intangible assets, regular system updates, security audits, and the development of comprehensive incident response plans. By advocating for these measures, brokers empower their clients to fortify their defenses against evolving cyber threats and position themselves more effectively in the ever-changing cybersecurity landscape.
Maintain open communication channels
Given the dynamic nature of cyber risk, brokers must establish and maintain open communication channels. Brokers should familiarize themselves with the key individuals responsible for cyber risk management and keep them informed about evolving cyber threats, industry trends, and updates in cyberattack insurance offerings. This engagement should extend beyond procurement guidance at renewal, developing into an ongoing effort. Be sure that clients know they can always reach out at any time if they have any concerns about their cyber risk management.
The relentless rise of cyber risks highlights the critical need for proactive cybersecurity strategies across industries. In the face of these new challenges, brokers need to step up and take on the pivotal role of working with their risk manager clients to effectively manage and mitigate these risks. In a landscape where cyber threats are in constant flux, brokers are key players in ensuring that businesses not only adapt but also stay steps ahead of the curve. Connect with us today for tailored insurance software solutions and proactive risk mitigation. Stay secure, stay ahead.