Key Insurance introduces cyber coverage
Published:Wednesday | June 27, 2018 | 12:00 AM
Key Insurance Company Limited is now offering coverage for cyber liability tailored for companies of all sizes, in partnership with an unnamed reinsurer, for which the premium starts at US$1,500 per year.
The product is not only meant to insure companies against cyber criminals, but also as a backstop for those that find themselves facing pecuniary charges for breaching data or privacy laws, either in Jamaica or foreign jurisdictions.
"Fines will be imposed," declared Key Insurance Managing Director Sandra Masterton, as she announced the new cyber insurance product at the company's annual general meeting this week.
A new European law, the GDPR, which took effect on May 25, puts limitations on how companies collect, use, and share people's data, and threatens fines of as much as four per cent of a firm's global annual revenue for non-compliance.
Jamaica's Data Protection Bill, introduced in Parliament in October 2017, is still being reviewed by legislators, but is expected to result in fundamental changes in how data is handled, as well as penalties for non-compliance.
Masterton said that while the cyber liability insurance was for all companies, the small firms tend to be more at risk of having their systems breached by hackers and "are more likely to pay the ransoms to get their business back up".
The coverage for cyberattacks protects against a company's vulnerability to fraud and identity theft through use of their information, with Masterton noting that hackers may use the systems of small firms as a gateway into larger companies.
Key last year earned premiums of $1.44 billion, dominated by motor coverage.
The company hopes the cyber liability product will help expand its non-motor business line, which as of May accounted for over 37 per cent of gross premiums, said Masterton.
Cyber would further diversify the non-motor portfolio, which already includes products for personal accident and travel coverage, as well as property.
Masterton told the Financial Gleaner that the company incurred no costs relating to the cyber product, which she said was not of the company's design and was essentially being distributed on behalf of the reinsurer.
"We have reinsurance that provides these services. It's almost like a concierge service," she said.
Coverage ranges from US$250,000 to US$10 million and includes an incident-response service; privacy and network security liability; privacy regulatory defense and penalties; digital media liability; network interruption and loss of income coverage; and coverage for cyber extortion.
The total package also includes assistance with public relations to repair the company's image. All services are provided by the international reinsurer.
"When you get hacked, the timer is running, telling you how much time you have to pay the ransom. You can call this service and they tell you what you need to do," she added. The service referenced is the call centre operated by Key's reinsurance partner.
Cyber is new area of risk coverage for Key.
"I actually searched for this product for about a year. I met with Lloyd's and it was cost prohibitive for small companies [with] minimum payment of US$10,000. So when you translate that into Jamaican dollars that's probably more than the budget for insurance for the entire year," said Masterton.
The solution came through a reinsurance provider - whom she declined to name - with a product backed by four Lloyd's syndicates.
Key's Chief Financial Officer, Jacqueline Johnson, indicated that the company Key is not expecting to see any significant take-up of the cyber product before 2019. For this year, she said, Key would focus on building awareness about the product.
"As we have seen in the insurance business, persons have to be aware before you actually see the results," Johnson said.
Key Insurance first hit the billion-dollar mark for gross premiums in 2016 and bettered its performance last year by nearly $360 million when it collected $1.44 billion. The company also turned around losses of $42.2 million to net profit of $42.6 million.
However, Key had a bad first quarter, ending March 2018, when it reported losses of $40 million. The loss in the comparative 2017 quarter was $1 million.
Johnson said the quarter was characterised by underwriting weaknesses, which have been addressed.
"We have been looking at our claims processes and also we have been looking at our underwriting. As a team we have seen where there are some downside aspects of the claims management process that we were focusing on. Based and what we have done on time, we have actually reversed some of these negative claims experience," she explained to the Financial Gleaner.
She said the company expects to report improved results in the current quarter, which closes June 30. Those results would be due within six weeks of the quarter's closing.
Key completed an operational review in 2017 which led to staff cuts, as well as process improvements.