With insurers and customers alike still not fully understanding cyber risk and how damaging it could prove, Paul Schiavone suggests pre- and post-event services associated with cyber policies are becoming increasingly important to customers.
“Unlike other insurance products that we sell, cyber is quite unique in that I find what customers gravitate most to are the crisis management services, the forensic legal services, the 1-800 numbers that help guide them before there’s an event, during an event and after the event,” Schiavone, regional head of financial lines in North America for Allianz Global Corporate & Specialty (AGCS), told Canadian Underwriter Thursday.
“The insurance part, the actual payment on the liability, is almost secondary for customers because they want to do whatever they can to prevent these things from happening,” he suggests. Since sometimes just having insurance is not good enough, “once the private information of your customers is released, you have a reputational problem.”
Schiavone notes that pre- and post-event services is an “area I think we need to focus more on and it’s becoming more and more important to customers.”
Having insureds buy into preventive measures is also a way of controlling losses, he points out. “This all helps mitigate loss and helps protect the customer and it’s good for everyone.”
With cyber, “we don’t really know what the claims are going to be because it’s such a young product,” Schiavone says. “We don’t have enough data yet, as we do, say, in directors and officers (D&O),” he points out, where there is a feel for where the market is, what types of claims will be seen and how big they will be.
That not being the case with cyber, Schiavone maintains it is critically important to “look at the data over and over again, and look at any potential trends.”
Despite some using the best defences currently available, “the feeling is everyone can still get hacked and data can be potentially released,” he says.
“This is going to be a bit of a moveable feast with cyber for a number of years. This is going to be a product that will continue to grow,” he says, anticipating that cyber “will become a very large part of the risk manager’s repertoire.”
As more jurisdictions – federally and provincially – adopt reporting requirements in the event of cyber breaches, Schiavone (pictured left) expects there will be more uptake in policies and interest in pre- and post-event services.
“We have seen that in the U.S. and that will occur in Canada,” he suggests, adding he expects regulatory demands to serve as a driver for customers to ask insurers about the services they offer and what advice they can provide to help ensure insureds are doing all they possibly can to be protected.
Having an entire package together – pre- and post-event services, internal controls, a good insurance partner and having insurance in place – “you can see how the entire cyber insurance world is going to play a major part in making sure that our customers are secure from regulatory issues, shareholder issues,” Schiavone says. “It will certainly be a driving force in the development of this industry and product.”
Schiavone was in Toronto Thursday for the kick-off of AGCS’s multi-city North American broker road show – which will also include New York, Chicago and San Francisco this fall – to introduce its suite of financial lines coverage. The line was launched in Canada last year and is moving on to the United States.
The suite consists of commercial management liability (including D&O and cyber for publicly traded corporations, private companies and not-for-profit entities); profession indemnity liability (E&O covering, among others, accountants, lawyers, architects, engineers and contractors); and financial institutions coverage customized for insurers, banks, investment managers, private equity, hedge funds and broker dealers, notes a statement from AGCS, Allianz Group’s specialist corporate insurer.
AGCS estimates the financial lines market to be at about US$15 billion, with the U.S. accounting for 60% of global premiums, Schiavone told Canadian Underwriter. “Our goal for our business is to be half a billion dollars in five years,” he says, with the company’s expectation being that financial lines “will be a driving force of growth for all lines over the next four or five years.”
Noting that the launch of the financial lines suite in North America “is really in response to the customers,” Schiavone says companies today are more multinational. “It’s very rare that you have a company that only does business in Canada,” he points out, with some having operations in places like Asia, South America, Central America or Europe.
“I think there’s a huge gap in the market today for companies that truly can service the international exposures,” Schiavone suggests, arguing that service must move beyond meeting legal requirements to being local, respectful and responsive. “It’s critical that you have boots on the ground,” with claims people available “so that you can have best-in-class service that’s done very quickly.”
Beyond financial lines, Canada also served as the North America launch point for AGCS’s cyber and directors and officers products, and will be “launching the first financial institutions policies for us,” Schiavone says.
Looking generally at Canada’s p&c insurance market, Schiavone notes “it’s a very difficult market; it’s a crowded field.” With those conditions, the challenge for any insurer is how does a company stand out in a crowded market place.