Reasons for steep cyber insurance premiums
Several factors have converged to trigger the premium hike in cyber insurance which is affecting small businesses in a big way. Let us have a look at a few of them.
Surge in Demand
With cyber-attacks becoming more sophisticated, effective and stealthy, organizations, big and small, have rushed to buy cyber insurance in recent years. Although taking precautionary measures and buying this insurance is a great move, it has undoubtedly put pressure on the insurance companies to match us to this demand. This imbalance in supply and demand leads to steep cyber insurance premiums.
Increasing Losses in the Cyber Insurance Business
Cyber liability insurance, like any other insurance product, is a business proposition. The increase in demand for this insurance is leading to an increase in claims and payout as well. As mentioned earlier, the volume of cyber-attacks has increased, thus leading to more and more claims.
Ultimately, the above, leads to losses for insurers. One of the ways to mitigate their losses is to increase the premiums.
Remote Working and Cloud
The rise of remote and hybrid working has pushed the boundaries of the traditional network to handle sensitive data. This creates higher odds of data breach and leakage, resulting in higher claims and eventually higher premiums.
Costly Cyber Threats like Ransomware
Few types of cyber threats are more expensive than others. Ransomware is one such cyber threat which is high on risk as well as cost. Insurance companies thus charge more premiums for covering ransomware and similar threats.
Steps to Take to Not be Affected by Steep Cyber Insurance Premiums
Insurance providers are encouraging businesses to act before purchasing cyber insurance. Strict security solutions are typically required by organizations to follow before they are given this insurance. Nevertheless, cyber security cannot be achieved by just having cyber insurance in place. These steps not only provide a robust solution but also help reduce premiums.
- Deploy data loss prevention systems aiming to control data theft and leakage
- Implementing data-backup solutions
- Undergo regular testing
- Use antivirus and anti-malware applications
- Adhere to regular system upgrades
- Implement robust password policies with multi-factor authentication
- Enable data encryption
- Educate employees on common security threats like phishing, and compliance requirements
The above steps taken by small businesses can assure the insurers that the organization is making efforts to defend against such threats and not merely relying on insurance. A preventive mindset helps insurance companies consider rate concessions. Investing in solutions that reduce the risk exposure and detect or mitigate the impact of cyber-attacks creates a positive impact on premium costs.
Steep cyber insurance premiums may be a matter of concern for small businesses. But, not having the coverage or having inadequate coverage is even more dangerous. Companies that go bare on cyber insurance may ultimately have an impact on their revenue. This is because, customers, suppliers or third parties involved favour doing business with organizations that have proper cyber coverage in place.