Like many new industries, cyber insurance has faced growing pains due to the ever-changing threat landscape. With the rapid increase of ransomware attacks, changing regulations, and the lack of visibility of how clients are protecting their infrastructure, it’s become extremely difficult for insurance providers to properly gauge the risk of providing policies.
Ransomware
The cost of cyber insurance rates are rising for a number of reasons, but the main reason (and more obvious) is the increase in cyber threats, specifically ransomware. After many high-profile breaches that have cost businesses millions of dollars, the demand to mitigate risk has never been higher. Additionally, smaller businesses are starting to be at the forefront of cyber threats as well. Due to the nature of these organizations, and hardships due to COVID, small businesses have become targets due to the lack of cybersecurity measures and secure infrastructures.
Risk Profile
A big contributor to what determines your cyber liability premium is the risk profile of the policy holder, as well as the risk level the insurance provider is willing to take on. Policy holders with limited or weak risk management programs are naturally a higher risk for insurance providers, which increases the cost of coverage. Tracking and managing organizational cybersecurity posture allows a better understanding of strengths and weaknesses, therefore more efficient cybersecurity spending. Additionally, being able to provide evidence of these efforts proves to an insurance provider the organization’s commitment to a culture of safety and reducing risk, which in turn can help to reduce your cyber liability premium.
Reinsurance
With the rate of risk cyber insurance providers are taking on, they too, are looking for ways to mitigate inherent industry risk. Policy providers can offset the risk of a particular policy by ensuring the policy with another insurance provider, otherwise called reinsurance. Simply put, insurance providers are insuring their policies to offset the cost of damages presented in the insurance payout. This diversification of risk can increase the overall capacity of policies; however, reinsurers are also increasing their premiums as well. So, policy holders are experiencing an increase in premiums due to the domino effect of their insurance providers getting reinsurance.
Changing Regulatory Landscape
Though we may sound like a broken record, the increase in cybercrimes is changing the ways in which we handle data and sensitive information. More than a dozen states have enacted regulations that make businesses implement better security measures to safeguard their customer’s and internal data. because of this, companies have to deal with the rising costs of keeping that data secure, which directly relates to the rising premiums on the cyber insurance front.
Final Thoughts
The cyber insurance industry is being fueled by the increase in ransomware and cybersecurity regulations, much of which was induced by the pandemic. The future of cyber liability insurance depends on the transparency between policy holder and insurer about their risk, and efforts to mitigate that risk. Luckily, there are tools and programs beginning to emerge to create insight into this data, which will allow for insurers to create more informed premiums.
Kyber Security | CT Cybersecurity Experts
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