How to explore the forgotten realm of personal cyber coverage

Trying to think of a new way to broach that cyber insurance discussion with your clients?

Why not highlight identity theft and fraud coverage for your personal lines clients, suggests a new research paper from the Insurance Institute of Canada.

“Discussion in Canada about identity fraud seldom, if ever, recognizes that consumers can transfer part of this risk by securing insurance coverage,” wrote the report’s author, Paul Kovacs, founder and executive director of the Institute for Catastrophic Loss Reduction. “The purchase of identity fraud insurance is not recommended or even identified as an option for Canadians in the advice provided by government agencies, cyber security experts, or consumer advocates. Consumer and policymaker awareness of identity and fraud coverage appears to be very low.”

Identity theft and fraud protection is widely available in Canada, with several insurers offering the coverage for more than a decade. Available as an endorsement for homeowners and tenant’s policies or included as basic coverage, the product has changed very little over time. The cost of coverage for consumers is very low or included in the basic premium, while deductibles are low or absent (although some insurers exclude identity theft claims when they offer a claims-free discount).

Coverage for identity theft and fraud typically focuses on indirect losses, such as prevention, restoration and recovery. This coverage differs significantly from personal auto, homeowners and tenants cover where the focus is on covering direct losses. An example of a direct loss would be hardware damage as a result of a cyberattack.

The provision of credit and identity restoration services has always been central to identity theft and fraud coverage, including personal information monitoring services, alerts, legal advice, and provision for lost wages, Kovacs reported. Some companies have also introduced coverage of legal defence costs for the resolution of disputes and repair or replacement of hardware and software if due to an attack or extortion. Enriched protection typically has not increased the low cost of coverage.

Cyber Risks 2019: Implications for the Insurance Industry in Canada, an updated perspective on a 2015 report, presented three findings:

• A threat – The industry can and must do more to protect itself and its customers
• An opportunity – For identity theft and fraud coverage, as well as commercial coverage
• An issue – Policymakers’ views about the role of insurance in cyber risk management is uncertain and missing in the current cyber security policy conversation.

The report also reiterated several recommendations for the industry. Among them:

• The insurance industry in Canada build the cyber insurance market over the next 10 years until most businesses (large and small), homeowners and tenants purchase coverage
• Appoint a senior executive to develop and implement a comprehensive plan to manage and reduce the long-term consequences of cyber risks
• Inform cyber security policy makers, consumer advocates, and law enforcement about the industry’s current contribution to cyber risk management
• Build a corporate culture of cyber security that includes actions to address technological threats and training for employees to be safer online.