Report: Personal cyber cover moves beyond identity theft

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 report notes that the highly digitised 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 28percent.

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.