The rise and rise (and rise) of cyber insurance premiums
As if we don’t have enough to think about with the high fuel prices, daft energy costs and the price of house hold items soring in the cost of living crisis we are in, businesses are seeing a huge rise in cyber insurance premiums.
Contrary to popular belief UK businesses don’t have an endless pot of money, I remember chatting to a very straight talking business leader many years ago when he said.
Get used to it, because if it moves, makes money, saves money or is a good idea it will be…….
And did I mention taxed………..
Now the world of insurance is a complex one, risk management has become increasingly expensive for insurers and therefore insurance policies are becoming increasingly expensive, insurance heavyweights such as AON are predicting cyber insurance premium hikes of 20% to 50% and some reports even say rises could increase by 1000%.
Because of this we are asking what is driving the rise in cyber insurance premiums ?
1. More Frequent Attacks
Traditional network architectures are evolving with the continued adoption of both the cloud and a hybrid work model. In many cases the speed of this evolution is outpacing essential security practices and leading to misconfigurations or vulnerabilities within an organisation’s infrastructure.
To make matters worse, the introduction of ransomware-as-a-service has allowed even novice attackers to execute ransomware attacks quickly and effectively. While estimates vary, some reports peg the number of attempted attacks in 2021 at over 300 million .
2. Cyber Insurance Itself
According to some experts, the presence of cyber insurance policies themselves are responsible for the growing frequency of attacks. Many attackers have become emboldened by the knowledge that insurance providers are now available to pay ransom demands. They believe that their attacks are no longer harming the organisations that are being exploited, but rather the insurance companies collecting the premiums.
3. Higher Demands
The average ransomware demand increased to $5.3 million in the first half of 2021, up from $847,000 in 2020. That's an increase of 518%. This may be due to the increased number of victims that are negotiating with their attackers in attempts to reduce the ransom. This has led to a common ransom tactic of demanding an exceptionally high sum with the expectation to settle for less.
4. Higher Pay outs
While most firms are tight-lipped about final payments, escalating demands often generate higher pay outs. In the first part of 2021, criminals saw a significant increase in their take-home pay, with ransom payments increasing by 86% to an average of $570,000, up from $312,000 in 2020.
As the pay out amounts continue to grow, this entices future attackers and results in many insurance companies now operating under the expectation that a ransomware event will occur with their policy holders. This creates an unfortunate cycle of more pay outs to ransomware operators and increased premiums to compensate.
5. Ransomware Attacks Exact A Heavy Toll
Lost productivity and business interruption can generate eye-watering losses.
For businesses that operate around the clock—such as eCommerce retailers, hospitality, healthcare, and governments—any service interruption can mean millions in lost revenue and even cost lives. The total cost of lost productivity combined with the ransom payment is the final cost of such an attack to both the victim and the insurance provider.
Unfortunately, ransomware attacks target every kind of business or organisation. Various reports indicate that criminals continue to broaden their horizons, attacking a growing list of industry sectors. This results in some sectors previously thought to be at a lower risk of a ransomware attack being ill-prepared for these situations.
Not surprisingly, the growing expense of cyber insurance pay outs is pushing insurers to raise premiums, rewrite policies, shift more responsibility to policyholders, and increase the depth and scope of their underwriting as well as their claim procedures. Other insurance companies might also soon follow the lead of AXA and remove coverage for ransom payments from their policies.
This puts today’s businesses in a precarious position as they plan for future risks. So, as the cyber insurance market adjusts to the changes in the threat landscape
What can your organisation do to protect itself?
If you have a cyber insurance policy, don't wait until you receive a notice regarding a premium increase from your carrier. Maintain a strong relationship with your insurance company and reach out to them now. This will allow you to ask questions and understand what kind of premium bump you may face in the upcoming year. If nothing else, being proactive will allow you time to budget for the increase. Alternatively, it can provide a window to search and qualify for a replacement policy.
Implement Foundational Security Measures
Many insurance providers are opting to drop coverage of their customers if they have not met certain security requirements. This can include multi-factor authentication (MFA), endpoint monitoring, and 24x7 continuous monitoring.
Generally, deploying additional security controls can help lower your risk profile and make it easier to maintain existing coverage, or apply for a replacement policy. Since it requires time, effort, and expense to deploy certain controls—especially those with the potential to reduce premiums significantly—make sure you start the implementation as soon as possible.
Establish a partnership with an insurance broker who understands the security measures you have in place. They might uncover options to keep insurance premiums manageable or increase coverage should the need arise.
Also, comparing policies can be a complex undertaking. Make sure to select a broker who expresses a willingness to help you compare policies. Bear in mind that the underwriting process varies depending on the insurance company, with many companies making it extremely rigorous and time-consuming.
Don't Overlook Security Partners
While insurance companies and brokers can provide access to cyber insurance policies, don't forget to speak with us and our partners who have experience in this domain.
Our leading cyber security partner is the fantastic Arctic Wolf, who are a market leader in cyber security operations, Arctic Wolf® maintains deep relationships within the insurance community, including partnerships with insurers who can offer competitive policies and rates. The Arctic Wolf Concierge Security® approach ensures you have experts available 24x7 who understand your environment and can work with you on the security best practices that many insurance carriers require.
We would love to show you how it all works and discuss solutions & services that can help reduce your growing cyber insurance premiums.
Contact us today
Keep an eye out for more cyber security blog posts over the next couple of weeks.
Here is a link to the previous blog post from our Technology Solutions Director Lee Wragg
Thanks for reading
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