Demand for Cybersecurity Insurance Amidst Increasing Hacks

Organizations nowadays face new challenges, with cyber insurers increasing rates in the face of a rise in expensive hacks. Insurers substantially raised premiums for cyber coverage during 2021 owing to a row of high-profile cyber attacks. As per recent reports, a cyberattack takes place every 11 seconds today, and by 2031 this ratio may worsen, hitting one cyberattack every 2 seconds.

Companies are leaning towards cyber insurance in the fear of significant fallout from a cyberattack. To be on the safer side, companies can perform an exhaustive self-assessment to identify vulnerabilities and take the necessary steps to safeguard the organization in the face of renewal. Whether it is the utilization of multi-factor authentication or endpoint detection and response or privileged access management or patch management or vulnerability management, to name a few, companies should be well-prepared for risk mitigation, resilience, and insurability.

Why is cybersecurity insurance in demand now?

As per reports, ransomware attacks grew 64% year-on-year between August 2020 and July 2021. And attackers are trying innovative methods including ransomware-as-a-service and triple-extortion ransomware techniques. The demand for cyber insurance is skyrocketing, mainly driven by claims and a rising number of companies experiencing cyber losses or another vendor in their supply chain facing an issue. Besides, new requirements aggravate the surge. The demand for cyber insurance has dramatically reset the pricing for insurance premiums.

The difficulty of companies with the rise in ransomware attacks

Direct-written premiums gathered by the largest U.S insurance carriers in 2021 surged by 92% year-over-year, as per information submitted by National Association of Insurance Commissioners. Some insurers charge as high as 300% at renewal. The insurers are lowering coverage limits on sectors that have been worst hit by cyber crime. These sectors comprise education, government, healthcare, and manufacturing. According to recent reports, insurers who didn’t mind to issue $5 million cyber liabilities policies in 2020 have scaled back to limits of $1 million to $3 million in 2021, even on renewals. This move prompted organizations to seek additional insurers to reach desired cyber liability coverage limits. On top of that, the unavailability of historical loss data (owing to the sector’s relatively short history) brings up another layer of insecurity to all involved.

How the cyber insurance costs increase yearly for companies

Higher costs have coincided with surging demand as a result of regular and several cyberttacks. For example, no other element had as much of an impact on cyber insurance premiums for the second quarter of 2021 as ransomware. The reality is several attackers are aware that big companies can afford to pay high ransoms since they won’t do it alone; they would rely on their cyber insurance policy to pay some of the ransom.

From the companies’ aspect, they should ensure that they are investing in cyber security controls. This will go a long way in making them have a good image in the market. Companies should work meticulously to anticipate underwriters’ questions about what they are doing to safeguard themselves from ransomware attacks. This shall include framing a roadmap for making improvements.

This is a crucial moment for the future of the insurance sector. The cyber environment is fragile, with threat volatility and recent losses. Given the current scenario, the insurance industry has to get more involved in the cyber sector which is still in its nascent stage. The companies can involve in a bit of planning and also early purchases of small amounts with surges over time. This would help in scaling the market that develops with the needs of the companies it supports. A combination of best practices can be practiced to keep companies’ cyber insurance rate surges reasonable.