As the digital world grows, so does the global need for cybersecurity insurance. Hackers are getting smarter, and unfortunately there is more to steal than ever before. A report from McAfee shows that almost 80% of companies store sensitive information in the public cloud—at a much higher rate than individual Americans (54%, according to Norton).
Cybersecurity insurance for a business seems like a no-brainer. Organizations, especially smaller ones, stand to lose a lot from a data breach; insurance is not only something they should have, but will desperately need as digital commerce expands. Yet a 2023 report by Network Assured showed that only 55% of companies have any cybersecurity insurance at all. Why is this the case?
The short answer is “it’s complicated;” the slightly longer answer is that the insurance industry faces several unique challenges when giving businesses cybersecurity. But what are the problems with cyber insurance, and how can the future of cyber insurance solve these issues? Keep reading to find out the pitfalls cybersecurity insurance needs to address, and how solutions like Trava will be key for insurance providers in the future.
What Are the 3 Biggest Challenges To Address the Cybersecurity Problem?
The three biggest problems for cybersecurity insurance right now are as follows:
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There is a lack of historical data for how to properly provide cyber insurance.
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Cyber risk is difficult to assess, and there are not good precedents for risk assessment.
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Paying for cyber insurance is expensive for end users, especially for smaller businesses.
One of these problems—lack of historical data—will naturally fix itself over time as the insurance industry learns from the past. But about the other two challenges? Let’s look at each in further detail.
Why Is It Hard To Determine Cyber Insurance Risks?
There are two main reasons why it’s hard to determine cyber risks for a client: ever-evolving cyber threats and inadequate risk assessment.
First, hacking methods are improving as quickly as cyber defenses; when cybersecurity strengthens to the point of being impenetrable, hackers eventually find a new way to break through. This back-and-forth creates a game of tug-of-war—and businesses lose every time. Harvard Business Review estimated that data breaches cost companies an average of $9.5 million in the US, which is almost double the global average.
As if this cyber attack arms race wasn’t bad enough, insurance companies are bringing paper to a digital fight: most risk assessments are done with a static, simple checklist. These checklists are not only too surface-level, but they also don’t give an accurate picture of how at-risk a company is to a data breach. Cybersecurity is not a single snapshot, but a moving reel of video where every second is different and the risks are constantly changing. A simple checklist simply cannot cover that much variability. This is why at Trava, we conduct continuous, agile risk assessment to ensure that cyber insurance coverage is as dynamic as the digital world itself.
Why Is Cyber Insurance So Expensive?
The cost of cyber insurance depends on some objective factors, such as company size, industry, revenue, and coverage plans. But the one factor that makes it overly expensive is risk, or the inability to properly determine it. Additionally, it’s tough to determine exactly how much a data breach might cost a business, which makes underwriting decisions even harder.
The core concept of insurance is creating safety nets for specific worst-case scenarios, but the ever-changing nature of cybersecurity makes it almost impossible to know what risks a client faces. And if an insurance company does not anticipate risk properly or clearly lay out expectations, they stand to put their clients (or themselves) in a vulnerable spot.
Since true cybersecurity is hard to maintain, insurance companies often default to charging higher rates to compensate for the perceived higher risk. But this is not only detrimental to businesses, it is especially harmful to small businesses—who, ironically, need protection the most. According to Forbes, cyber criminals are three times more likely to target businesses with fewer than 100 employees. And while larger businesses have a lot to lose, it’s much more difficult to recover for smaller businesses that often have less capital and resources.
So, cybersecurity is a new practice that’s always changing, difficult to predict, and has a lot of risks that cost everyone money. How can we make cyber insurance a more affordable, profitable, and sustainable practice?
How To Determine Cyber Insurance Coverage: With Trava
Modern problems require modern solutions. And the ever-evolving, continuous risks of cybersecurity require ever-evolving, continuous risk assessment. That’s what a solution like Trava brings: a way for insurance providers to more confidently assess their clients’ risk levels. With better risk assessment, providers can give their clients the protection they need at a price that makes sense for their coverage.
Trava approaches cybersecurity as an ongoing process, one that needs constant assessing and checking to confirm what changes occur. Cyber insurance doesn’t have to be guess work, and with small businesses especially, the best cyber insurance will cover their needs exactly—and that’s all they should pay for. Trava makes those kinds of coverage plans much easier to create because you will have objective data to back up your decisions.
What makes Trava stand out is not just our risk management program, but our services; we work with our customers and walk them through proper risk management for the clients they ensure. You’re not just buying a product when you work with us, you’re buying assistance, guidance, and counsel as you navigate the complexities of cyber insurance. We enable you to confidently assess risk, and provide lower coverage rates for your low-risk customers.
If you’d like to see how much easier cyber risk assessment can be, schedule a demo with Trava and witness the future of cybersecurity firsthand.