As more businesses seek an additional layer of protection with cyber insurance policies, it is becoming increasingly difficult to obtain one that fits the bill. Over the last few years, cyber insurance carriers have been not-so-steadily increasing their rates. But why is that? Let’s take a look at some of the primary reasons cyber insurance policy rates are surging and what business leaders can do to help mitigate some of these spikes when shopping around.
Why rates are increasing
- Increase in cyber incidents: Recent years have witnessed an alarming increase in the frequency, sophistication, and severity of cyber attacks. From ransomware attacks on major corporations to breaches exposing the personally identifiable information (PII) and personal health information (PHI) of millions, the digital world has become a high-risk environment. This heightened risk translates to higher insurance claims, leading insurers to increase premiums.
- Higher costs associated with cyber attacks: Today’s cyber attacks are not just more frequent; they’re more expensive. Ransom demands have grown exponentially, with some bad actors demanding tens of millions of dollars. Moreover, the collateral damage — including business interruption, legal fees, public relations, and customer restitution — significantly increases the costs of an incident.
- Complexity of cyber risk: As bad actors continue to evolve their tactics, cyber risks have become more sophisticated. To this end, what was considered a robust defense strategy a year ago might be deemed inadequate today. This leaves cyber insurance providers grappling with the dynamic nature of cyber threats, making it challenging to assess risks and price policies accurately.
- Lack of historical data: Unlike other types of insurance that have decades or even centuries of data to analyze, cyber insurance can still feel a lot like operating in the Wild West. A lack of historical data makes it hard for cyber insurers to predict the frequency and severity of claims. As a result, they might adopt a more conservative stance, reflected in higher premiums.
- High demand for cyber insurance: As more companies become aware of cyber threats and take action to be proactive, more businesses are seeking cyber insurance policies as an additional layer of protection. The high demand, coupled with the increased risks and costs associated with cyber incidents, further drives up premiums.
What business leaders can do to find accurately priced cyber insurance
The rising rates of cyber insurance policies are a reflection of our times, but they shouldn’t deter business leaders from procuring a policy that fits the bill. It’s important to remember that cyber insurance rates can be negotiated; depending on the size, industry, and complexity of a business, it may not be necessary to have a policy that covers everything under the sun. It’s also critical to understand the volume and dollar value of the sensitive data a company is responsible for protecting.
With this type of intel, cyber insurance providers will have a far easier time determining an accurate rate. Innovative and intuitive tools like RiskAware can quickly help by calculating this invaluable information and then attaching a dollar value, which business owners can easily share with insurance providers.
Despite the increasing costs of cyber insurance coverage, many providers are still willing to work with business leaders to find accurately priced policies. It’s imperative to remember that while cyber insurance costs can consume a good portion of the technology budget, the potential consequences of a cyber incident can be far more devastating.
Ready to take action? Learn more about RiskAware and try it for yourself for free. Not quite ready for a cyber insurance policy but want to understand more about how it all works? Read The 2023 guide to cyber insurance for small businesses.