September Newsletter - Financial executives still struggling with Cyber Insurance intricacies

In this month's edition, we start off with news of a report that financial executives are still struggling to get to grips with the intricacies of their cyber insurance policies. 

Elsewhere, home insurance premiums have seen a modest 2.1% average rise in the last year, the insurance industry is still battling hard in the fight against fraud and finally, if you manage a fleet of drivers, we offer our top tips for keeping your fleet well-maintained and your drivers happy. 

Financial executives still struggling with Cyber Insurance intricacies

 

A new report has laid bare the level of misunderstanding in the industry with regards to the depth of cover provided by cyber insurance. In a study conducted by FM Global, over 100 senior financial executives working for some of the largest companies in the world were questioned on the specifics of their cyber insurance cover in the event of a security incident, with seven out of ten believing that their policy would cover losses that aren’t typically covered by insurance.

Whilst some of these aspects of income loss are covered by a typical cyber insurance, several statistics stick out which are particularly alarming. For example, 45% of CFOs expect their insurers to cover most losses after an attack, with 26% expected that all of their losses would be covered.

Some of the financial losses that executives expected to face as a direct result of a cyber attack on their businesses included:

• Damage and deterioration to the company’s brand or reputation
• Increasing levels of scrutiny from the investment community
• Lessened revenue and earnings
• Decline in market share and share price
• Introduction of regulatory compliance problems

A typical cyber insurance policy would offer Business Interruption cover, offering financial assistance in the aftermath of an attack to get the affected company back on track, and some providers offer protection for reputation, offering PR support and crisis management to deal with the public effects that an attack can have, i.e. damage to public image, trust etc.

However, several of the potential losses mentioned above are not typically covered by insurance, let alone a cyber policy. Decline in market share and share price is not a standard component of cyber cover, alongside protection from any regulatory compliance issues and issues with any investment communities.

It points to a misunderstanding of the core components of cyber insurance, and a need for financial executives to improve their knowledge of what cover they actually have when purchasing cyber cover.

“As essential as cyber insurance is, the findings indicate financial executives may be deriving a false sense of security from it,” said Kevin Ingram, executive vice president and chief financial officer at FM Global. “While insurance is an essential part of the risk management formula, there are losses related to a cyber-attack that insurance cannot cover—like damage to a company’s reputation, lost market share, missed growth opportunities, decreased valuation, and losses stemming from increased cost of capital. That’s why we’re so committed to helping our clients prevent loss in the first place.”

Home Insurance premiums see modest 2.1% average rise

 

Home insurance bills have seen an average rise of just 2.1% over the course of the last twelve months, according to data provided by analytics experts at Consumer Intelligence which puts the average home insurance premium cost at £136.

This is being put down to a competitive marketplace keeping pace with the rate of inflation across the United Kingdom, with further studying of the data putting London atop the list of the costliest regions thanks to an average premium cost of £187. Interestingly, only one of the country’s regions recorded a decrease based on 2018’s figures, with Wales seeing a drop of 0.3% and the South East sitting at the opposite end of the spectrum with a mighty 4.1% rise.

Under-50s were able to get off with a relatively measured average increase of 1.7%, whilst those over 50 were hit with an average increase of 2.7% over the last twelve years, amounting to an average premium cost of £143.

Interestingly, the data also suggested that homes built prior to 1895 remain the most expensive to insure due to an annual premium average of £162, with properties erected between 1985 and 2000 the cheapest thanks to an average premium of £126.

“Home insurance is a very competitive marketplace, helping to keep overall pricing down,” offered Consumer Intelligence’s pricing expert, John Blevins.

“London unsurprisingly maintains its number one spot with some of the most expensive properties in the UK and the biggest urban area – with cities generally having a much higher crime rate.”

 

Industry continues fight against scammers as cost of fraud rises

 

Data provided by the Association of British Insurers (ABI) last year seemed to suggest that the insurance industry was getting to grips with fraudulent claims, with hundreds of thousands of frauds including pre-planned accidents and dishonest policy applications detected and exposed in 2017.

New findings provided by the ABI have provided several worrying statistics alongside signs for optimism, with the headline news being a 3% rise in frauds in 2018 leaving last year’s total at 469,000. Simultaneously, a 6% increase in the value of fraudulent claim has been reported, which has in turn contributed to the average cost of an insurance scam rising to £12,000. Fraudulent claims saw a 6% rise alongside a 5% increase in dishonest applications.

There are some positives to take from the data, however. For example, motor insurance remains the most commonly scammed insurance product, but both the value and number of claims made in 2018 decreased by 9% and 8% respectively from the previous year. Property frauds also saw a decline on 2017’s numbers, despite a rise in the average value of a fraudulent claim.

The numbers provided by the ABI suggest that the industry is still making headway in its attempts to combat fraud, despite the tactics employed by scammers evolving.

“Insurance fraud is the scourge of honest insurance customers who make genuine claims. Insurance cheats can be ingenious, and are constantly looking for new scams to exploit, which is why the industry makes no apology for spending around £250 million a year on measures to tackle this crime,” offered the ABI’s manager of fraud and financial crime, Mark Allen. “Spearheaded by the Insurance Fraud Bureau and the Insurance Fraud Enforcement Department, there will be no let-up in the industry’s determination to root out fraudsters and press for the stiffest possible penalties for these cheats.”

The ABI’s findings also provided some interesting tales of fraudsters who were thoroughly found out, including:

• A retired fridge engineer who decided to drop his claim against his former employer for hearing loss when it was discovered that he was the singer for a rock band
• A preacher who was found guilty of staging a motor crash and sentenced to ten months in jail
• A criminal gang who attempted to make a claim for close to £1m due to water damage to a restaurant that had never been opened due to a burst pipe that they had deliberately broken
• The scam story of last year, which involved a group of 16 people involved in crash-for-cash frauds with staged motor crashes which conned insurers for almost £1.2m

Managing a fleet of vehicles - it's not just about insurance

 

If your business employs a fleet of drivers, then you’ll likely be aware of the need to provide them with the best possible support in order for them to carry out their job. Managing a fleet and its needs can be a complex task, so we’ve put together several top tips for providing your drivers with assistance out on the road that will make their and your lives easier.

Check your fleet’s vehicles regularly
A simple tip, but an important one; regular checks of the vehicles that make up your fleet is a key component of fleet management. Checks prior and after use may seem like an unnecessary process but they’re vital in order to keep a record of the condition of your vehicles, and will help to make sure that future service and maintenance checks address any issues that may arise during use. The better condition your vehicles are kept in, the more comfortable your drivers will be when using them, too.

Plan your routes and encourage safe driving
The safety of your drivers will be paramount for any fleet manager or supervisor, making planning routes for long-distance journeys a key component when it comes to their welfare out on the road. Simply put, the quickest route to a destination may not necessarily be the safest or most suitable option depending on the size of your vehicle, which puts extra emphasis on arranging an appropriate route.

Telematics devices and tracking can assist with this, as well as providing data on driving habits. Factors like harsh braking and speeding can be recorded, making it a useful tool when it comes to judging a driver’s safety out on the road.

Having the appropriate insurance in place
Regardless of the industry or field, every employee wants to know that their company has appropriate protection in place to safeguard against accidents, regardless of who’s at fault. Getting the right Fleet Insurance is a key part of this, and could help you to reduce running costs alongside providing your drivers with roadside assistance in the event of an incident, too.

West Craven Insurance is available to discuss our comprehensive Fleet Insurance options. Click here to discuss how we can help to insure your fleet of vehicles.

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