Small Business Cyber Risk Represents a Big Opportunity for Agents
Q&A with Joshua Parrish, Executive Vice President at RT Specialty
In an era where ransomware and phishing attacks are more common than ever, cyber insurance has become crucial for large and small firms alike.
However, many smaller businesses aren’t buying it, typically because smaller risks aren’t cost-effective for many agents to place in the first place: smaller risks mean smaller commissions and thus a smaller profit.
In this Q&A, Joshua Parrish, executive vice president at specialty insurance wholesaler RT Specialty, discusses how the addition of cyber liability coverage to the RT Connector digital marketplace for commercial excess and surplus liability coverage could help open the door to bring small businesses the coverage they need—and offer an opportunity for agents to get in on a growing market. RT Connector enables agents to automatically generate and compare quotes from multiple top-rated carriers based on their clients’ risk information, then bind and issue that coverage in minutes once a decision has been made. [Sponsor note: The Connector and RT Specialty do not solicit insurance from the public.]
Q
First, I want to talk about how important cyber coverage is for small business owners. Do you see a sizable demand for that?
A
The penetration of the marketplace is not as good as it should be. In today’s environment, we believe that cyber coverage is likely one of the most important insurance instruments available for all businesses of all sizes, but for small businesses, it’s an acute issue. Small businesses have fewer controls and less resources available to them than larger enterprises do, and some hacking outfits are aware of that and target smaller businesses.
Fewer than 20% of all SMEs [small- and medium-sized enterprises] in America are purchasing stand-alone cyber insurance right now. Contrast that with the U.S. SBA [Small Business Administration] showing that in 2020 alone over 700,000 small businesses were attacked by hackers. This is an incredible opportunity for savvy insurance brokers: there’s room to grow in this space and more buyers will be coming into the market, every month, every quarter and every year.
Q
What are some barriers to market penetration? Can this new cyber option with RT Connector help bring those barriers down?
A
In addition to the natural barriers to selling any non-compulsory insurance product, the level of detail included in a cyber quote is often a challenge to communicate to any prospective buyer. To aid with that, the RT Connector has comparative analysis built into it to help our agents and buyers quickly identify the differences between marketplaces and the policies available to them.
The friction in placing cyber is also amplified when the premiums are so small. Facilitating the placement of insurance across a SME portfolio is incredibly challenging to do while maintaining sufficient brokerage margins. Our goal is to eliminate as much of that friction as possible, so that retail agents are able to service their policyholders optimally across all lines of coverage.
Q
Can you talk a little about what differentiates the quotes RT Connector might generate? What kind of customization do they have?
A
This platform was created with the intent to capture the greatest share of the most likely selected options for businesses of this size. Agents can select between $1 million and $3 million in coverage limits, and various retentions between $1,000 and $10,000.
Q
You've already gone over a few of the advantages for retail agents by going through a platform like RT Connector, but are there any more advantages you want to touch on compared to a more traditional underwriting process?
A
Similar to my prior comments on brokerages, underwriting companies experience significant burdens in managing a SME portfolio. Our methods and process should alleviate a significant amount of that burden and allow our carriers to divert some of their attention towards the tougher and larger risks that we need them to spend more time on. In addition, measurable data will aid in their determination of where they are most competitive and can help them determine where to best deploy their resources and capital that will aid the overall marketplace for both buyers and sellers.
Q
Part of an agent's value-add is the ability to directly negotiate with carriers over specific details of coverage. Is there a concern that an automatic quoting system like that could remove that value?
A
This tool is for agents—it’s not to replace agents. What we’ve built should help unleash the agent’s ability to spend more time providing that expert guidance and less time poring over multiple offers to determine adequacy.
As far as what you touched on regarding negotiation, the vast majority of risks that fall into the SME space have a minimal amount of negotiation, but require a significant amount of navigation. But for those accounts that do require additional touchpoints due to whatever unique problem they are facing, their agent will now be unleashed to spend more time crafting a suitable coverage offering, where they previously would have been bogged down with reviewing every detail of a terms sheet to create a digestible proposal for their policyholders.
