Cyber Insurance Sticker Shock: Now What?

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Cyber insurance has become increasingly expensive for most policyholders. Various organizations, including industry heavyweights such as  Aon  who have predicted premium hikes between 20% and 50% this year. There are even reports of premium increases as high as 1,000% for organizations with the highest risk.

Unfortunately, many of these premium increases occur with little warning, often within a few weeks of a policy renewal.

What’s Driving Cyber Insurance Price Increases?

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 organization’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 organizations 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.

See a close up of a document being signed.

4. Higher Payouts

While most firms are tight-lipped about final payments, escalating demands often generate higher payouts. 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 payout 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 payouts 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 organization. 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 payouts 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 organization do to protect itself?

Get Proactive

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 24×7 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.

Shop Around

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 connect with your cybersecurity vendors who have experience in this domain. As the market leader in 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 24×7 who understand your environment and can work with you on the security best practices that many insurance carriers require.

Christopher Fielder

Christopher Fielder

Christopher Fielder has been in the cybersecurity world for almost 20 years with experience ranging from military, government, and corporate environments. Christopher holds 18 industry certifications including the CISSP, GPEN, GISP, GCFE, GSEC, GCIH, CEH, and more; along with a Master’s Degree in Information Security. Today he is the Director of Product Marketing for Arctic Wolf where he enjoys researching emerging security trends and highlighting the expertise of the Arctic Wolf team.
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