A report by Aon, the financial risk mitigation service firm has revealed that the year 2020 recorded an average of three new Error and Omission (E&O) cyber matters per business day which is equivalent to a 100 percent increase from 2019.
Also, the year 2020 saw a quarterly surge in the average loss severity for claims as clients experienced high event-related losses in many cases, the report revealed. In addition, it found that ransomware attacks over the previous three years have skyrocketed by 486 percent.
In a bid to counter the increasing threat, insurers added new arrows – such as public-facing scanning resources – to their quivers that can search for cyber threat vulnerabilities. “Many may have ransom ware-specific applications focused on areas including improving insured risk controls and improving risk selection for insurers,” The firm said.
Aon further predicted that the trends around cyber matters; accelerated by the COVID-19 pandemic will persist even further in 2021 whilst also predicting that there will be rate increase, ranging between 20 percent and 50 percent, along with risk reevaluations.
“To maintain a commitment to long-term stable cyber capacity, insurers are reviewing areas in their portfolios where underwriting action is needed and reevaluating capacity deployment, specifically as it relates to ransomware losses,” Aon said.
Noting the related risk trends to watch in the months ahead, the global professional services firm pointed out E&O exposures stemming from digital transformation initiatives quickened by COVID-19, cyber extortion, particularly through ransomware attacks as well as continuous remote working after the pandemic and increase potential risk vulnerabilities for the long term.
Adding clauses to the forecast, Aon said existing insurance may not fully address the new E&O risk emerging from digital transformation initiatives quickened by COVID-19. In addition, it said ransomware has evolved beyond the encryption of sensitive data to the threat of exposure of that data on the internet which may lead to another big risk; potential liability consequences such as regulatory fines or third-party lawsuits.
Errors and omissions insurance (E&O), according to Investopedia is a professional liability insurance that protects companies, their workers, and other professionals against claims of inadequate work or negligent actions as it often covers both court costs and any settlements up to the amount specified by the insurance contract. It is generally required for professional advice-giving or service-providing businesses.
The Nigerian insurance industry provides general insurance coverage to ensure business and professionals remain in their various line of work after being hit by a storm. The E&O insurance protects companies against the full costs of a claim made by a client against a professional who provides advice or service such as a consultant, financial adviser, insurance agent, or a lawyer.