Cybersecurity insurance premiums vary in range and easily be tens of thousands of dollars annually, depending on many factors. The average per million premium is $1,500. Insurance companies providing cyber insurance must carefully consider influential elements—like industry type, company size, security measures, data assets, and third-party relationships—to accurately determine the cost of premiums.

As the cyber insurance market expands, insurance providers encounter distinct challenges in pricing their policies. One of these obstacles is the limited availability of historical data, especially when compared to more established lines of insurance. This lack of knowledge impedes the development of actuarial models and statistical frameworks necessary for accurately pricing cyber insurance premiums.

The rapidly evolving nature of cyber threats adds complexity to the equation. According to Forbes, global cyber-attacks rose by 7% in the first quarter of 2023 alone compared to the previous year. This dynamic environment requires insurers to continuously reassess and refine their risk assessment methodologies to effectively protect their clients from emerging risks.

To help you, our Trava Security team put together this brief guide on cyber premiums. By better understanding how cyber insurance premiums are calculated, you will be able to rest a little easier knowing you can secure the coverage you need while keeping costs under control.

Is Cyber Insurance Getting More Expensive?

According to recent reports, global cyber insurance premiums have experienced an upward trend due to the increasing frequency and costliness of cyber threats. Ransomware attacks and cyber threats have surged in recent years, resulting in expensive recovery processes and the potential for lawsuits involving numerous affected parties.

The COVID-19 pandemic certainly didn’t help matters. It further exacerbated the situation as organizations quickly transitioned to remote work, leaving cybersecurity gaps and IT departments playing catch-up. As a result, companies are now seeing the need for stronger cybersecurity measures and higher insurance coverage to protect against potential breaches.

It’s worth noting that while cyber insurance premiums may be increasing, the cyber insurance market size is also growing as organizations understand the financial and reputational risks associated with cyber incidents. The unique nature of cyber risks, coupled with the dynamic cybersecurity landscape, contributes to the higher costs of cyber insurance compared to other types of insurance.

How Is Cyber Insurance Calculated?

Calculating cyber insurance involves a comprehensive assessment of various factors to determine appropriate premiums and coverage. When working with cybersecurity insurance companies, you can expect to follow these key steps to effectively calculate your cyber insurance premiums:

  1. Understand Cyber Risk - The first step is to conduct a broad assessment of your cybersecurity posture, in order to gain deep insights into cyber risks—including threat landscape, attack vectors, industry-specific risks, and regulatory requirements. This step involves studying the evolving threat landscape, common attack vectors, regulatory requirements, and industry-specific risks related to cybersecurity and data privacy.

  1. Complete Risk Assessments - Assessing your cyber risk for potential policyholders includes evaluation based on your industry, company size, security measures, data assets, claims history, and third-party relationships. This information is crucial in determining risk exposure and potential financial losses. If you require assistance in establishing a comprehensive cyber risk management program, Trava Security is here to help. Our expertise in risk assessment empowers companies with the insights they need to ensure that appropriately comprehensive cybersecurity measures are in place.

  1. Analyze the Data - Cybersecurity insurance companies can help you leverage data analytics capabilities to analyze historical data, industry trends, and loss experience. This analysis provides insights into claims frequency, severity, and patterns, each of which plays an important role in insurance providers’ ability to make data-driven decisions when pricing your policy.

  1. Prepare Underwriting Guidelines - Next, the cybersecurity insurance provider will work to help you understand clear guidelines specific to cyber insurance. This involves things like outlining risk criteria, acceptable security practices, minimum requirements, and risk mitigation measures for consistency in risk evaluation and policy pricing.

  1. Conduct Actuarial Modeling - Although the pool of data is limited since cybersecurity is a relatively new industry, actuarial modeling is still a helpful tool in estimating potential losses and determining appropriate premiums. In order to quantify the financial impact of cyber incidents and establish pricing parameters for your specific needs, these models consider various factors, such as historical data, industry benchmarks, claims experience, and risk assessment outputs.

  1. Leverage Expertise and Partnerships - To benefit from the vast expertise of cybersecurity professionals and industry partners, potential providers will often collaborate with risk consultants—like Trava Security—to enhance their risk assessment capabilities. This way they can better understand emerging threats, stay updated with evolving industry practices, and keep your company protected against a wide range of threats.

  1. Monitor and Adapt Continuously - Neither cybersecurity nor calculating cybersecurity premiums is a “set it and forget it” endeavor. It’s vital that companies stay vigilant, and that their cybersecurity insurance providers are monitoring the constantly evolving cyber threat landscape (and emerging vulnerabilities that come with it). Providers will often adjust pricing and coverage as necessary, leveraging industry trends and lessons learned to enhance risk evaluation and underwriting processes.

In following these steps, insurance providers work together with companies to effectively calculate cyber insurance premiums and provide comprehensive, competitive coverage.

Gain an Edge in the Cyber Insurance Business with Trava

As you navigate the cybersecurity insurance landscape, you can harness the power of unbiased data and provide better insurance coverage by working with Trava. We offer ongoing cyber risk management to help companies secure comprehensive protection against evolving cyber threats. By leveraging Trava, you can:

  • Conduct the same vulnerability scans potential carriers use to analyze your cybersecurity posture and assess your risk.

  • Analyze a wide range of security controls from an underwriter’s point of view.

  • Increase your insurability, secure effective coverage, and keep your premiums manageable.

By choosing Trava, you not only gain valuable cybersecurity insights, but you also gain a trusted partner who is as invested in your success as you are. If you’re ready to experience the power of unbiased data, simplified processes, and ongoing support with Trava—book a demo today!