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Reflections on the UK’s SME Cyber Insurance Market

Coalition Blog: Reflections on the UK’s SME cyber insurance market

Launching a company in a new region is both exciting and challenging, and the result of many months of hard work. September was the first month of trading our Active Cyber Insurance solution for small to medium sized enterprises (SMEs) in the UK. 

As we move into autumn proper, Tom Draper, Head of Insurance, and Stephen Wares, Head of Risk Engineering, reflect on what the cyber insurance market looks like from the perspective of a technology-driven managing general agent (MGA).

Launching into a shifting cyber insurance landscape

We launched Coalition UK into a cyber landscape filled with opportunities and pitfalls. Generally speaking, the SME sector is awakening to the benefits of purchasing a cyber insurance policy and the business consequences of being uninsured.

However, SME encompasses a broad category with varying levels of cyber risk knowledge, so part of our approach is to help create more digitally savvy businesses through the broking community. 

Price continues to be a driving force in the sector, with some serious losses by carriers that have reduced the availability of capacity, and, in many cases, increased premiums. Our goal is to protect the unprotected and help SMEs that don't have the cyber know-how to protect themselves from cyber attacks. 

Coalition provides policyholders with a 360-degree service, including free access to our cybersecurity platform, Coalition Control, and to our expert in-house incident response and claims teams. Because of this, we can often resolve incidents before they become claims. According to our Cyber Claims Report: Mid-year Update, our US policyholders experienced 50% fewer claims than the rest of the market. 

We call our approach Active Insurance. We assess each organization's risk prior to quoting, continually scan their externally facing networks throughout the policy term, alert them if a vulnerability arises, and we're there for them if an incident happens. It also ensures that coverage for every business is priced fairly based on its individual security profile, and helps us to serve UK clients with competitive pricing and maintenance of full limit comprehensive cover.

Handling our first UK cyber incident

Even though we've only been trading a short time, we have handled our first cyber incident in the UK. The fact that it came from one of our low-premium policyholders and that it happened so soon demonstrates the voracity of cyber risk for British SMEs. It can hit any business at any time. Thankfully, our Coalition Incident Response (CIR) team was readily available to remediate the issue before it became a claim— all at no cost to the insured.

No matter an organization's size, our policyholders receive the same level of service.

Diving into the London market

The London market has seen a few changes in the cyber sector in recent months. Brokers have reported a much more cautious approach to SME risk from insurers, with premiums increasing considerably and businesses in some industries finding it challenging to get cover at all. Coalition has been able to add immediate value for brokers with SME clients that have harder-to-place risks. 

Insurers in the London market are looking to diversify, but the SME cyber opportunity is not often embedded in their business model in the same way it is with brokers. In many cases, they don't have the resources or bandwidth to effectively meet the demands of the SME market, and there are very few who provide zero to a billion capability to cover the broad size spectrum. For brokers, SMEs are incredibly important because they tend to have more SME clients than they do large corporate clients. 

Market capacity for cyber is also not what it was even 5-6 years ago. Underwriters are becoming more cautious about the risks they cover, with concerns about the systemic risk that writing a large SME book can create. Often this leads to the SMEs that need the most help unable to find adequate cover. These SMEs are operating in industries that have complex digital and data footprints, are traditionally lacking in cyber awareness, or perhaps lack the resources to put the necessary controls in place.

Coalition has been able to have these conversations with brokers and demonstrate that there is a path to insurability for these SMEs. We are able to clearly show where a firm's digital vulnerabilities are and what steps they need to take to become insurable. 

The value we've been able to show so far is partially the ability to fill this gap in the market, but also transparency on why risks are declined. We know how important it is to support brokers and help their clients understand what roadblocks they face in getting insurance. For brokers, this is an opportunity to strengthen their client relationships even further.

Introducing brokers to a new cyber SME proposition

We've made a positive start, and we are excited to bring Coalition to brokers nationwide. However, we're aware that Active Insurance is a new way of insuring cyber for both UK SMEs and their brokers.

We begin every quote with a full risk assessment report which shows the digital health of the organisation and highlights any critical vulnerabilities that must be remediated before cover incepts. The report also provides a loss scenario specific to the insured, along with peer benchmarking recommendations. This enables clients to better understand and appreciate their risk and how cyber insurance can support them. 

Technical explanations can be challenging, but Coalition has worked hard to provide as much information and explanation as possible, whilst supporting this with access to our in-house security analyst team, and, of course, our cyber insurance experts. 

Coalition Active Insurance Flywheel

Every policyholder receives free access to Coalition Control, our Attack Surface Monitoring platform that enables business users to track their security posture throughout the policy term, and resolve any issues that arise before they become serious. Our goal is to help brokers and policyholders use the platform as part of an ongoing cyber risk mitigation strategy.

Disrupting the cyber insurance 'norm,' distinguishing our solution from others in the UK market, and proving the efficacy of our technology-driven cover will be a challenge. We know that empowering brokers to work with their clients throughout the policy lifetime on improving their digital security and risk management is critical to our mission. 

Join us

All of us at Coalition UK look forward to learning with you and better advising on digital risks. If you're a UK broker reading this, I invite you to become one of our first partners to get appointed with Coalition.

Cyber insurance requires a new approach, and we're excited to partner with you to be part of the solution. Thank you for being on this mission with us to protect the unprotected from evolving digital risks.