Since its inception in the late 1990s, cybersecurity insurance has been a hot (and sometimes controversial) topic. The concept itself is simple enough—cyber insurance covers companies in the event of significant losses due to incidents like data breaches or ransomware attacks that disrupt the course of business and potentially erode trust with customers.
While the idea is pretty straightforward, it can become overwhelming as you get into the weeds. That being said, every day, cyber insurance providers work with their clients to help them assess their level of risk and find the appropriate policy type and level of coverage. And while no two clients have the same exact needs or priorities, they’re interested in the same outcomes—and have the same concerns. One of the top concerns, of course, is cost.
Ultimately, they want to know if cyber insurance is really worth it.
In this article, we’re going to explore cyber insurance rates, including the factors behind the rise in cyber insurance premiums. That way, as an insurance provider you can be in a better position to advise clients as they explore their needs—and decide whether they’re ready to make the investment or not.
We’ll start by addressing the proverbial elephant in the room—is cyber insurance, like virtually everything else in our modern world, costing more each year? (Spoiler alert: Yes, it is.)
Is Cyber Insurance Getting More Expensive?
Yes, cyber insurance is getting more expensive—but so is the relative cost of inaction. Any company that’s asking itself questions like “Is cyber insurance worth the cost?” should consider the fact that in 2023, the average data breach came at a cost of $4.35 million. Cyber insurance helps organizations recoup some of their losses when targeted by cyberattacks or data breaches.
What Is the Average Cyber Insurance Premium Increase in 2023?
Because so many variables impact premium rates, it’s difficult to quantify the average cyber insurance premium increase, but some experts suggest premium rate increases for 2023 could fall anywhere between 25% and 100%.
To put this into perspective, this rise is in line with premium increases in 2022 which, according to the National Association of Insurance Commissioners (NAIC) Cyber Insurance Report, was 75.3% (over 2021’s rates). Going back even further, to 2021, the Wall Street Journal reported that “direct-written premiums collected by the largest U.S. insurance carriers in 2021 swelled by 92% year-over-year.”
Why Are Cyber Premiums Increasing?
As cyber insurance premiums increase, companies exploring coverage will likely have questions about why, exactly, it’s getting more expensive.
One factor contributing to cyber insurance rate increases is the increased scale and sophistication of cyberattacks. For example, the U.S. Government Accountability Office (GAO) cites how “large-scale attacks” like the 2021 attack on the Colonial Pipeline have “highlighted the potential for catastrophic financial damages” and made many insurers keen to “limit their exposure” to the potential losses that could accompany a breach or attack.
While events like the Colonial Pipeline attack become headline news, even “routine” (for lack of a better word) attacks are seemingly costlier by the year. Even just between 2016 and 2019, the GAO’s report found that the cost of a cyberattack nearly doubled.
Additional reasons behind the increasing cost of cyber insurance coverage include…
The Continuing Threat of Ransomware: Ransomware is one of the fastest-growing types of cybercrime, which is not only becoming more sophisticated but more costly as well (with the average ransomware attack “skyrocketing” to over $84,000, according to a recent Forbes article).
The Increasing Cost to Respond to a Cyberattack or Data Breach: When a data breach or cyberattack occurs, companies must respond quickly and effectively—which can be difficult to manage when you consider that the average response cost went up by 80% (from $10,000 to $18,000 according to one report).
Insurance Companies’ Hesitancy to Take On High-Risk Cases: As Fortune notes, the average cyber insurance rose by 79% in Q2 of 2023, following the two previous quarters’ growth of roughly 50%. As they take note of large-scale, costly attacks occurring on both the national and global stage, insurance providers are doing what they can to mitigate their clients’ liability, like “more carefully scrutinizing companies’ cyber practices” and “excluding certain vulnerable technologies” in their policy offerings.
All Things Considered, Is Cyber Insurance Worth It?
Companies that understand the challenges and vulnerabilities that come with doing business in our increasingly-digitized and connected world generally benefit from cyber insurance coverage. And when it comes to cyber security insurance for a small business, cost should not be the only factor that is considered. Companies must understand that they are not just responsible for keeping their own data, applications, and systems secure—they’re also responsible for protecting their customers’ personal information.
Getting cyber insurance coverage isn’t just signing a contract. As mentioned previously, every business has unique needs and priorities worth exploring, so they can find the coverage they need at a price that’s within their budget.
The first step toward finding cyber insurance coverage is to complete a needs assessment. There are two sides to this. On one hand, there are big-picture-type questions a company should internally ask, in order, to gauge their existing cybersecurity posture. They should also take a long, hard look at their current (and potential) vulnerabilities, overall preparedness for an attack or data breach, and so on. For a sample of this assessment type, read our guide, 8 Cybersecurity Risk Assessment Questions Every Business Should Ask.
As the need for cyber insurance comes into focus, then, the next step for a company looking to attain coverage is to complete Trava’s free Cyber Risk Checkup. A company simply needs to complete a short form, and then we’ll perform a vulnerability scan of their website and provide a Cyber Risk Score via email. After all, once you know where you stand, it’s a lot easier to strengthen and maintain an effective cybersecurity posture.
Trava Security: Cyber Insurance, Demystified
With all this talk of cyber insurance premiums and the importance of coverage, we barely even talked about how Trava Security can simplify the risk assessment process for insurance agencies. Our platform empowers you with a comprehensive view into your clients’ cybersecurity infrastructure This, in turn, empowers you to provide them with timely insights and recommendations and help them on their way toward obtaining the cyber insurance coverage they need to prevent potential catastrophes. Book a demo to learn more.