How Cybersecurity Insurance is getting more and more expensive and prescriptive
Posted 23 Mar at 5:52 pm in Productivity
[5 min read]
Though it may sound counterintuitive, the increasing need for cybersecurity insurance is making cyber insurance policies more expensive and harder to acquire. As cyber insurance grows increasingly essential for modern businesses, influxes of zero-day exploits, ransomware attacks, and malicious cyber activity, insurers see fewer and fewer reasons to stay in business.
Experts say cyber insurance premiums have increased 50 to 100% in the last year alone. The exorbitant price hikes likely result from increasing ransomware attacks and ransom payment costs.
With some experts quoting over 80% increases in ransom payment costs, over 160% more malicious cyberattacks, and a changing business model raising the barrier for entry, some companies are questioning whether or not cyber insurance is worth it.
Why is cybersecurity insurance becoming more expensive?
In 2021, studies showed that 46% of companies opted for cybersecurity insurance. These companies sacrifice skyrocketing premiums and lower limits for their security. Statistics indicate that cyber insurers’ loss ratio is a record high, ballooning upwards of 73%.
Cybersecurity insurers state that increasing rates and increasingly limited cyber protection conditions result from frequent claims. For insurers to maintain competitive rates and complete protection, they must sustain streams of capital from premiums.
As companies continue claiming cyber insurance claims, insurers lose money. The uptick in attacks and claims creates compounding losses for insurers and dims their desires for the volatile business market of cyber insurance.
Demand is still increasing despite eye-watering price hikes and similar cyber insurance trends. In an increasingly cyber-dependent environment for entrepreneurs and legacy organizations incorporating more remote services, many businesses don’t have a choice.
These rapid changes in the insurance scene make it more difficult for businesses to adapt. Risk management becomes increasingly difficult to coordinate in an environment constantly shifting.
For example, companies must invest in adequate precautions against malicious hackers to save money on cyber insurance. Remote web access, employees working from home, and vertical integration within companies introduce more cybersecurity concerns.
Internal and external cybersecurity threats require special consideration and resources to protect and prevent. As the cost of supporting cybersecurity professionals and equipment teams increases, companies opt for cyber insurance to avoid complications. This mentality has created a prescriptive cycle of cyber insurance.
The main takeaway is that the increased rate of ransomware and cyber attacks is positively proportional to cyber insurers’ loss ratios resulting from their clients taking claims out. Cyber insurers are seeing fewer and fewer reasons to keep rates low without more capital and stable market conditions.
Instead, many organizations turn to managed service providers to escape unrelenting price hikes and prescriptive services.
What other options do companies have?
It’s no surprise that some companies depend on managed service providers (MSPs) for cybersecurity protection. Legacy and startup clients turn to MSPs for cyber defense, employee training, and consultation regarding how companies should handle ransomware attacks and security risks.
Organizations often hail MSPs to build, deploy, and maintain specialized cloud architectures, provide data backup solutions and mitigation strategies. MSPs distinguish themselves by having superior cybersecurity protection to meet the expanding market conditions and spiking demand.
MSPs understand why cybersecurity is important for business, and many big-name managed service providers will also include some form of insurance or coverage to protect their clients and staff. We recommend identifying any ransomware, cyber extortion, and cyber-attack insurance when analyzing MSPs