Press release

Best’s Special Report: Personal Cyber Insurance Moves Beyond Identity Theft

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The number of stand-alone policies against identity theft has jumped as awareness and severity continues to grow, according to a new AM Best report.

The new Best’s Special Report, “Personal Cyber Insurance Moves Beyond Identity Theft,” notes that the highly digitized environment has elevated personal cyber risks, especially during the pandemic. Personal lines cyber coverage generally handles key risks like identity theft, cyber extortion, social engineering, financial fraud and compromised systems. Consumers in the past may have had identity theft as part of a package policy, such as their homeowner’s coverage, and the majority of policies currently in force are included as part of a package policy. However, in the past two years, the number of stand-alone policies has increased by 28%.

Loss sensitivity is elevated for the identity theft line due to the low premium base and volatility about the amount of losses incurred. However, the line of business has been profitable, despite growing concerns about exposures. Although stand-alone paid loss ratios vary, large losses have been concentrated in just a very few companies.

Awareness of personal cyber risk has grown, but awareness about insurance products and coverages has not kept up. AM Best believes factors such as agent education, consumer awareness and more extensive marketing could lead to a significant increase in premiums.

“Take-up rates are relatively low at this point, but all these factors could create positive momentum for personal cyber demand,” said David Blades, associate director, industry research and analytics. “The relatively low product profile may be an inadvertent help to the industry as current pricing is a best estimate and not based on any actuarial analysis given the low frequency of losses.”

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=312020.

A video discussion about the report with Blades and Lauren Magro, associate analyst, industry research and analytics, is available at http://www.ambest.com/v.asp?v=ambcyberidtheft821.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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