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The Actuary The magazine of the Institute & Faculty of Actuaries

Cyber insurance payout rate hits 99%

A whopping 99% of claims made on cyber insurance policies were paid out in the UK last year, according to research by the Association of British Insurers (ABI).

UK has potential to be global cyber insurance leader ©iStock

The findings show that 205 of the 207 cyber claims made by ABI members were paid out in 2018, making this one of the highest acceptance rates across all insurance products.

However, just 11% of businesses are thought to have a specific cyber insurance policy in place, meaning millions of small businesses could still potentially be at risk.

The ABI said that the take-up rate is “worryingly low”, and estimates that there is around £80m of cyber premium underwritten in the UK, compared with £1.1bn for pet insurance.

“Cyber insurance is a valuable product – the claims acceptance rates speak for themselves," ABI’s director of general insurance policy, James Dalton, said.

"The additional support a business receives, beyond dealing with the pure financial losses, is a key attribute of most cyber insurance policies too often overlooked."

The ABI said that the UK could become a world leader in cyber insurance, but that an inability by insurers to access raw breach data risks limiting the potential of the market.

It has been asking the Information Commissioner’s Office (ICO) to make anonymised cyber breach data publicly available, but the body has so far yet to agree.

The proposals would enable insurers to price risk more accurately and manage exposure more effectively by feeding this data directly into their modelling, according to the ABI.

It is thought that this would make cyber insurance more widely available, more accurately priced, and better tailored to each business.

The ABI said it would continue to work with the ICO to find a solution that enables both innovation and data privacy in the cyber market.

“Data is key to insurers’ ability to better understand and more accurately price cyber risk,” Dalton continued.

“We need the ICO to work with us to find what data can be shared to help insurers provide more cover to the many businesses that need it in this digital age.”

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