In our predictions, we highlight how cybersecurity will become a key area for insurers in 2022. The seriousness and growth in damages caused by cyberthreats has raised the price of policies sharply in 2021, according to experts. Given this situation, companies must either be prepared to take out new insurance at higher rates or expect a rise in the cost of their current policy. But what elements determine the cost of cyber insurance for insurers? There are 5 key factors, both internal and external:
The 5 Key Factors related to cyber insurance cost
1. Sector:
There are sectors that are more prone to be victims of cyberattacks than others, such as public administrations, technology and healthcare. Apart from the number of cyberattacks suffered, insurers also take into account cases where the associated costs generated are sizable, such as the financial sector. Therefore, if an organization belongs to any of these sectors, policies will be more expensive.
2. Size:
Although SMEs in general have more discrete cybersecurity tools, the greater the number of devices, users and systems an organization has, the larger its threat surface and therefore the greater the possibility of being the victim of a cyberattack. Policies are tailored according to size and complexity.
3. Geographical and remote presence:
Operating from or having a workforce in different countries also multiplies the risks and usually requires implementing new layers of cybersecurity adapted to the context and local regulations, particularly in terms of data protection. The rise in remote working also needs to be factored in, as this also extends the surface outside the organization's perimeter and requires VPNs. Policies are also adapted to cover these situations.
4. Company revenue determines the cost of coverage:
Company revenue can be a major element in determining the maximum amount of losses generated by the cyberattack that the insurer covers and this influences the cost of policies significantly.
5. Types of coverage:
Organizations also tailor their policies according to the most frequent or dangerous risks they want to cover. Coverage against highly sophisticated cyberattacks such as living-off-the-land APT groups is more costly than more common threats, such as ransomware through phishing using email as an entry vector or credential theft and employee identity theft.
Notwithstanding, insurers require organizations to have implemented a minimum level of cybersecurity tools to be able to access their policies. This includes endpoint protection, which goes beyond more traditional antivirus solutions, and increasingly, multi-factor authentication (MFA), which is critical to protect the organization's accounts and credentials.
This is because most data breaches occur because cyber threat actors gain access to systems because passwords are too weak and lack an extra security layer; or because they manage to steal credentials.
Insurers are particularly concerned, as data breaches are among the costliest incidents for organizations (and therefore for them too, as they bear these costs). Not only is it necessary to mitigate the damages of the breach itself, but also on some occasions, to pay the million-dollar fines that the authorities impose for lack of data protection diligence: for example, the £20 million fine that British Airways received for the data breach it suffered in 2020.
For these reasons, it is imperative for insurers and also for a growing number of corporate software vendors, such as Salesforce, that organizations wishing to engage their services have a reliable and powerful MFA service in place to manage all their credentials and devices.
FAQs
Your industry. Certain industries are subject to higher premiums because they are more susceptible to threats. Hospitals, for example, are a major target of ransomware attacks because they store sensitive patient data and will often choose to pay ransoms rather than risk their patients' lives by going offline.
Why is cyber liability insurance so expensive? ›
Your industry. Certain industries are subject to higher premiums because they are more susceptible to threats. Hospitals, for example, are a major target of ransomware attacks because they store sensitive patient data and will often choose to pay ransoms rather than risk their patients' lives by going offline.
Why are cyber insurance premiums rising? ›
With Attacks on the Upswing, Cyber Insurance Premiums Poised to Rise Too. Insurers doubled premiums in late 2021 to offset losses from ransomware claims. With attacks rising again, organizations can anticipate a new round of increases.
What are the challenges for the cyber insurance industry? ›
Unlike traditional insurance, cyber insurance lacks a robust history of claims data. The scarcity of historical data makes it difficult for underwriters to accurately predict and price cyber risks. Developing models that can effectively navigate this uncertainty remains a significant challenge.
What are the problems with cyber security insurance? ›
However, the cyber insurance industry faces significant challenges, including a lack of historical data, a lack of ability to predict the future of cyber risk, the possibility of large cascading loss events, uncertainties among market participants about what is specifically covered under such policies, and legal ...
What are the costs of cybersecurity policies? ›
Minimum costs for outsourced cybersecurity services start around $2,000 - $3,500 per month and go up from there. On a per-user basis, that breaks down to a range between $195 and $350 per user, including support and maintenance.
How much does cyber insurance cost for a business? ›
How much does cyber insurance typically cost? For small businesses, annual cyber insurance premiums can range from $1,000 to $7,500. This range is dependent on several factors, which we discuss below. A recent survey found that the majority of cyber insurance underwriters expect rates to increase slightly in 2024.
What is the biggest threat to the insurance industry? ›
As the insurance sector grapples with multifaceted challenges, identifying and understanding these risk factors is the first step in crafting a resilient strategy for the future.
- Compliance changes. ...
- Cybersecurity threats. ...
- Technology changes. ...
- Climate change & other environmental factors. ...
- Talent shortage. ...
- Financial risks.
How can cyber threats impact the insurance sector? Cyber threats can lead to unauthorized access to confidential data, financial fraud, and even disruption of services. This can tarnish the reputation of insurance companies, lead to legal consequences, and result in significant financial damages.
Why do companies need cyber insurance? ›
A cyber insurance policy helps an organization pay for any financial losses they may incur in the event of a cyberattack or data breach. It also helps them cover any costs related to the remediation process, such as paying for the investigation, crisis communication, legal services, and refunds to customers.
Also, most cyber liability insurance policies don't cover your business for a decrease in company value. For example, your intellectual information could be stolen through digital crime. Without that information, your company becomes less valuable overall, but insurance providers will not cover that loss of value.
What are the main problems with cyber security? ›
Common Cybersecurity Issues That Organizations Face
- Organizations and cybersecurity attacks. ...
- Social engineering. ...
- Ransomware. ...
- Cloud computing issues. ...
- Distributed denial-of-service (DDoS) ...
- Artificial intelligence (AI) and machine learning (ML) ...
- Crypto and blockchain attacks. ...
- Third-party software.
Today, the average cost of cyber claims is substantial, far exceeding the average cost of cyber premiums. And considering the proactive and reactive services on offer, it's clear that cyber insurance is more than worth the money.
How much does cyber crime insurance cost? ›
The average premium for cyber liability insurance is about $145 per month.
Why purchase cyber liability insurance? ›
Cyber liability insurance could pay out for losses arising from the following computer- and computer system-related crimes and exposures, among others: Hacking and cyberattacks. Data corruption and/or theft.
Do I need cyber liability insurance? ›
Any business that stores or processes sensitive information should consider cyber liability insurance. Consider coverage if you store data such as customer names and addresses, Social Security numbers, medical records, and financial information such as credit card information.
