A New Approach Needed for Cyber Insurance
Posted on 5th January 2022 at 12:01
Since the start of the pandemic, there has been a 400% increase in ransomware attacks, in which the average ransomware payment increased from 82% in 2020. There has never been a time more prevalent for cyber protection and insurance, yet insurance brokers have spent much of 2021 reducing coverage and increasing their insurance premium rates.
In November, Lloyds of London, the carrier holding a fifth of the cyber insurance market, discouraged its syndicate from taking on a cyber business in 2022.
As the insurance industry changes, it may be time to consider what happens when it finally destabilizes and current models for cyber insurance, in which policies were plentiful and easy to get hold of, will not be sustainable for much longer.
Cybersecurity and Cyber Insurance is a New Concept
Cybersecurity is a new concept compared to many of the other insured fields; global cybercrime and the growth of lateral-moving enterprise ransomware have only happened in the last five years.
Actuaries have data on risk factors going back hundreds of years but have very little data on cybercrime losses in comparison. So insurers who took an industry-standard hands-off approach to take on new customers with any due diligence were opening themselves up for trouble as the risk environment changed.
According to S&P Global Market Intelligence data, between 2016 and 2019, 43% of every pound paid in cyber insurance premiums was spent paying an insurance claim or related cost. But from 2020 that cost ratio rocketed to 73% and rising !
Cyber Insurance Needs to Change
Cyber insurance was only meant to be for an unforeseen disaster, but things have changed, and Cyber attacks are way up. Now anyone and everyone is at risk.
Every 19 seconds in the UK, one small business is successfully hacked, and 51% report being hit by Ransomware. With 60% of small companies going out of business within six months of falling victim to a cyberattack, it's no wonder the industry is trying to consolidate data aggregation to make it more viable.
In response to the crisis, a group of key insurers have teamed up over the past year to create CyberAccuView, an industry-supported data-sharing service working for the benefit of policyholders. The insurers that serve them, and the connected economy at large to work out a more standard practice. It aims to help the industry provide better value and service for policyholders in their cyber risk mitigation;
Provide leadership in fighting cybercrime
improve resilience to cyber risk
help ensure a competitive market for cyber insurance.
We foresee that the old, lenient, affordable policies will come to an end and instead, policies will be written upon higher security standards with lower premium payouts.
Several new financial tech firms emphasising data-driven security policies, including network monitoring software in their dealings and requiring things like patching, believe their insurance model is sustainable. This will drive businesses to take a positive approach to their risk assessment process and cyber management to help them to achieve insurability.
Take our Cyber Security Challange which we have designed for busy business owners and leadership teams who would like to upskill and learn how to recover from a ransomware attack in 9 steps
The most unfortunate will be those who can not afford the insurance premiums. Without insurance, a company has to budget how to cover the actual ransom itself and all of the expenses related to recovery and investigations. Those expenses could include exspensive legal fees, business losses from downtime and bad PR costs, in addition to the technical costs of investigating and restoring the network, which needs to be part of disaster planning.
How ransomware actors will respond to lower profits is not clear. Ransomware is a low-cost, high reward scheme likely, profit margins will remain to rise. Cybercriminals could optimise profits through better targeting.
Cybersecurity experts predict more data breaches and ransomware attacks in the future, businesses need to be proactive to protect themselves from cyber incidents. Cyber insurance will become even more critical due to this trend - don't wait until you've been hit with a cyberattack before taking proactive measures!
Think Cloud are the North's award-winning and premier outsourced cyber security provider in Hull and managed IT provider in Hull. We have all the resources you need to protect your business from cybercriminals, prevent data loss, ransomware infections and more.
Also, to help you start thinking about how your business might improve its cyber security practices, we've compiled a list of 15 Ways To Protect Your Business From A Cyber Attack we have made free for all busineses to download and conduct a gap analysis today !
Contact us today if you want some guidance on getting started with our Outsourced Cyber Security Solution or if you require help recovering from a cyberattack.
Call 01482 333505
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You may also like reading: Ultimate Guide To Future Cyber Insurance Trends
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