Businesses of all sizes are vulnerable to security incidents – whether that’s a case of accidental data loss or a full-blown cyber attack. The cost of a data breach has also increased in the last few years. The average price of a data breach is $4.37 million, while the average cost to remediate ransomware is a massive $1.85 million.
In this landscape, it’s no wonder that more and more companies are turning to cyber insurance as a safety net in the event of a security breach. Cyber insurance is a type of policy that covers your company in the event of a cyber attack.
There are two forms of cyber insurance coverage: first-party coverage and third-party coverage. First-party coverage protects your company should you suffer a breach of your systems, and third-party coverage helps cover the costs if you have a breach that impacts your clients’ systems.
The cyber insurance market is changing
The cyber insurance market is currently undergoing a massive shift. Insurance is becoming more expensive, with reports indicating that global cyber insurance pricing has increased by an average of 32% in 2021.
As well as this, we’re seeing a trend of insurers putting more measures in place before agreeing to insure a business. They’re looking for evidence of security hardening and reasonable security policies in order to insure companies.
Below, we will explore why the cyber insurance market is changing, whether your business should renew or get cyber insurance, and how to reduce your premiums.
Why are cyber insurance prices increasing?
Currently, insurance players are providing cyber insurance at a loss. They didn’t mean to do this. It’s just that there’s a lack of historical data in this sector to predict steady premiums. In other areas of insurance, insurance providers have decades of data they can analyze to inform their insurance policies. But cybersecurity is so nascent that this is hard to do.
Moreover, cyber attackers are constantly evolving in sophistication and tactics. The rise in ransomware over the last year, for example, has led to unsustainable loss ratios for many insurers.
In line with this, the National Association of Insurance Commissioners analysis of the U.S. cyber insurance market found that the volume of cyber insurance premiums written grew by almost 30% in 2020, while loss ratios for many carriers were over 100%.
It’s clear that things need to change in order for these businesses to stay profitable; the cyber insurance model of the last few years simply isn’t sustainable.
What this means for your organization
If you currently have cyber insurance, we advise you to review your policy before you renew it carefully. No doubt, your coverage will have become more expensive. As well as this, you may find that your policy now contains more terms and conditions.
Essentially, insurance providers have started requesting that their clients improve their security defenses so that they are better protected against cyber attacks. This is becoming a prerequisite for obtaining coverage.
For SMBs, these rising prices and requests for additional security technologies can make cyber insurance an extremely expensive investment – possibly one that’s out of reach. Saying this, we must remember the old adage: “an ounce of prevention is worth a pound of cure”.
Indeed, while insurance might be more expensive, its cost is relatively small in comparison to the price of a devastating cyber attack.
Should I get cyber insurance for my SMB?
It’s hard to give a blanket yes or no answer to this question. Every business is unique, so your decision to purchase cyber insurance will depend on your circumstances: the sector you work in, your approach to security, your risk profile and so on.
Having cyber insurance can be a great help in the event of a cyber attack – but it’s not necessarily going to be a complete safety net. More insurers, for example, are taking ransomware coverage out of their policies. This means that insurance will only protect you against certain types of incidents.
We’ve already mentioned that insurers are putting more onus on their clients to bolster their defenses. The good news is that doing so can dramatically lower your insurance premiums by reducing your risk profile.
Of course, many SMBs lack the in-house security expertise and resources to achieve security maturity on their own. That’s why we advise working with a managed IT provider, who can help you to improve your security defenses, find the right insurance provider for you and reduce the risks of successful cyber attacks.
Reduce Your Risk of Cybersecurity Losses Due to a Cyber Attack
Texas I.T. Pros can help your Denton or Wise County business ensure you have adequate cybersecurity protections in place to defend against the latest types of attacks.
Contact us today to learn more! Call 940-239-6500 or reach out online.