🔒Hartford Steam Boiler’s latest innovation — specialty cyberspace insurance

In August of 2020 — just months into the pandemic — Forbes Magazine published its first-ever list of highest-paid stars on TikTok, the wildly popular short-form video app.

The teens and young adults who topped the list, known broadly as social media influencers, had not only garnered tens of millions of followers, but had also cashed in on their celebrity status with annual paydays ranging from $1.2 million to $5 million.

In fact, from 2019 to 2021, according to market research firm Statista, the influencer market industry more than doubled from $6.5 billion to $13.8 billion. This growth has been driven, in part, by an increase in social media activity during the pandemic.

And the appeal of influencers has not simply modified how companies market — Estee Lauder, for instance, invested 75% of its 2019 marketing budget in social media influencers — but has also created a new opportunity for insurance companies like Hartford Steam Boiler (HSB), which last month launched a new social media income interruption coverage as an option within its cyber protection offerings.

HSB’s latest coverage covers lost income for customers who are paid for social media through advertising, direct sales, marketing campaigns, or other product placements, or who are unable to access their account due to unauthorized use, takeover of the account, or a malware attack.

The company’s latest innovation reflects an approach to developing niche market specialty products for which HSB has built a reputation. Last February, the 150-year-old insurer, part of Munich Re and based in downtown Hartford at 1 State Street, also introduced a workplace violence response coverage.

“Over the past 20 years, we’ve really expanded into specialty lines of business to create products where the coverage gaps are,” said James Hajjar, HSB’s cyber practice leader. “As needs develop, we want to be first or close to first in developing products in those spaces.”

Risk exposures

And over the past decade, Hajjar says, cybersecurity coverage has been a growing need for customers as incidents of identity theft, account hacking and ransomware have escalated substantially — especially during the pandemic.

Federal Trade Commission numbers show that Americans have filed more than half-a-million COVID-19 fraud reports and have lost an estimated $480 million since March 2020, and the number of identity thefts more than doubled to 1.9 million from 2019 to 2020, according to Alite Group data.

While cyber coverage has been widely available to commercial clients for nearly two decades, it has only picked up traction in personal lines business over the past four to five years, Hajjar said.

But the risk exposures have become greater as homes become more technology-infused — from smart phones and computers to networked entertainment systems and tech-controlled lights and thermostats.

Increasingly cybercriminals are targeting individuals and while nearly one-third of respondents in a national Verisk cybersecurity survey had been the victim of a cyberattack, only 20% said they had cyber insurance coverage.

Part of the low adoption rates for coverage, research shows, is a lack of understanding of the risk exposures among consumers, which insurers in 2019 ranked as the top challenge to offering personal cyber insurance. But the pandemic has started to shift consumer awareness and behaviors. Over the past two years, the number of standalone identity theft cyber coverage policies has increased by 28%, according to AM Best.

Understanding consumer needs plays a vital role, Hajjar says, in developing and pricing niche products for cyber coverage, particularly in the social media market.

“We do a lot of [our own proprietary] research to understand what’s happening in the [market] space,” Hajjar said. “There’s finite information out there in public sources, but we conduct [consumer] surveys and talk to experts to understand how consumers are using social media, both from a frequency and severity perspective.”

He says unlike standard equipment breakdown coverage, which is HSB’s primary focus, specialty cyberspace products take longer to bring to market because each exposure — from data breaches to cyberbullying to identity recovery — is a different experience with different needs and partners.

“We have a number of partners [for policyholders] across the value chair,” Hajjar said, noting HSB’s coverages can include expertise in extortion remediation, forensics IT, credit monitoring and psychiatric counseling depending on the nature of the cybercrime.

Hajjar says as families think through their risk, they often realize how far-reaching the insurable risks are.

“When people think about [elderly] parents being defrauded out of money, protecting their children from cyberbullying or securing their connected home devices, there’s broad appeal across a number of coverages,” Hajjar said.

He said he’s bullish on the growth of the cyber market and social media coverage. Industry data estimates that roughly 10% of social media users are currently monetizing their personal use, but the growth in sheer users — more than 520 million new users joined social platforms this year through July, or 16.5 new users per second, according to Datareportal — suggest an expanding market for influencers.

That will also likely grow the pool of cybercriminals, Hajjar said.

He says HSB and its partners are working with data to be able to predict and prevent when a cyberattack event would happen. Through app-based technologies the goal is to detect, for instance, if a website is malicious or to inform policyholders if their personal information is on the dark web to mitigate risks.

“The cyber world never sleeps, so we’re constantly looking to keep updated and making changes to coverages as exposures change,” Hajjar said. “It’s an ever-evolving space.”