The Impact of Cyber Threats on Insurance Pricing

This article examines the various factors that can lead to high cyber insurance costs, such as the complexity of the insurance policy, the type of data used, and the provider's reputation. It also provides tips on how to save money on cyber insurance premiums.

Fremont, CA: Industry specialists have observed that the increase in the severity and frequency of damages caused by cyber threats has resulted in a significant rise in policy premiums throughout 2021. In this situation, businesses must choose between acquiring new insurance policies at higher rates or expecting a hike in the premiums of their current coverage. What specific factors influence the pricing of cyber insurance? Five key elements encompass both internal and external aspects:

The Five Crucial Elements that Affect Cyber Insurance Costs

Sector:

Specific industries are more susceptible to cyberattacks compared to others. These include public administrations, technology, and healthcare sectors. In addition to the frequency of cyberattacks, insurers consider the magnitude of associated costs, particularly in the financial industry. Consequently, organizations operating within these sectors can expect higher insurance premiums.

Size:

Even though small and medium-sized enterprises (SMEs) typically possess a range of distinct cybersecurity tools, the size of an organization's threat surface increases with the number of devices, users, and systems it has. Consequently, the chances of falling victim to a cyberattack also rise. Policies are customized based on the organization's size and level of complexity.

Geographical and Remote Presence:

Having operations or employees in multiple countries increases the potential risks. It necessitates implementing additional cybersecurity measures tailored to the specific context and local regulations, especially regarding data protection. The growing trend of remote work must also be considered, as it expands the organization's boundaries and necessitates using VPNs. Policies are also adjusted to address these circumstances.

Company Revenue Determines the Cost of Coverage:

The cyberattack's impact on the insurer's coverage and policy costs is heavily influenced by the company's revenue, making it a crucial factor in determining the maximum losses incurred.

Types of Coverage:

Organizations also customize their policies based on the prevalent or severe risks they aim to protect against. Safeguarding against advanced cyberattacks like living-off-the-land APT groups is more expensive compared to addressing more typical threats, such as ransomware delivered through phishing emails or instances of credential theft and employee identity theft.

Insurers mandate that organizations have basic cybersecurity measures to qualify for their policies. This encompasses endpoint protection, which surpasses traditional antivirus software, and the growing necessity of multi-factor authentication (MFA) to safeguard the organization's accounts and credentials. This requirement is because most data breaches happen due to cyber attackers exploiting weak passwords and the absence of an additional layer of security or by successfully pilfering credentials.