The greater reliance on everything connected to the internet during the pandemic, with people working and spending more time at home, has led to a huge increase in cyber incidents. The number of insurers researching cyber risk for personal lines has increased five-fold, and cyber risk is also an important topic for mutual insurers that want to support their member/policyholders across all risks.
Working from home increases cyber risks, and one of the clear outcomes of the pandemic is that there will be many more people working from home than previously. Hackers have seen this as a great opportunity and there has been an overwhelming increase in phishing attempts, spam attacks and fraudulent emails.
There have been spikes in identity theft in the US and the incidence of fraudulent websites and phone scams have gone up by 300%. Over half of Europeans surveyed have experienced at least one type of cyber-attack in the last two years, including monetary fraud, identity theft and shopping scams. In Asia, the increase of mobile devices and connectivity has created new exposures that hackers are keen to exploit.
Defrauding the elderly is a big problem around the world, with the most vulnerable populations targeted. Personal cost of cyber fraud has increased considerably, not only the financial cost but also emotional distress, increased stress levels and lost productivity. Social engineering scams – manipulating people to divulge confidential information accounts for one third of all cyberattacks on employers and their employees – are often the doorway to huge data breaches.
At the household level the potential for exposure to cyber-crime is even greater and usually starts with staff using workplace devices for personal use. Ransomware attacks are growing, with households now being targeted as the path of least resistance.
According to a Swiss Re global study in 2019, the top cyber-related fears of people are that criminals will get access to personal financial credentials, identity theft that leads to fraudulent purchases, loss of personal data, files, photos, videos, etc., and unauthorised publication of private information. This is an opportunity for insurers to address policyholders’ needs with advanced insurance coverage and expert services. Cyber risk has become a core product line in commercial lines and that knowledge is now being tailored to the personal lines market.
The reinsurance community has been very active in this area, offering cyber reinsurance turn-key solutions which include expert services and claims support. These solutions can be plugged into existing personal lines insurance products as an endorsement or a rider, and there are several reinsurers offering such programmes.
The expert services are a crucial part of cyber insurance as more than 90% of incidents do not result in actual claims payment because the experts can fix the issue before any loss arises. Many of these are false alarms or can easily be dealt with, with the insurance acting as a backstop for any losses that do occur. Other cyber services for personal lines include advice, incident remediation, fraud resolution, education and various monitoring tools that can provide an early warning that something might be wrong.
There are several examples of mutual insurers that have started to offer personal cyber insurance solutions. Some have offered it as a free benefit to members, while others have offered it as an optional add on to existing policies. Cover limits for personal cyber are usually in the EUR 12,000 to 20,000 range, and premiums are usually in the EUR 40 to 50 range.
Personal cyber products give insurers the opportunity to attract new business, increase average premiums and capture new segments like Generation Z and Millennials. It allows coverage gaps such as silent cyber to be closed by affirmative offers and can help increase brand loyalty and relevancy with modern offerings. It can be used to drive customer retention and competitor differentiation but will soon become a negative factor for those that do not offer it.
