As per an industry expert in cyber security, small and medium-sized enterprises (SMEs) may be priced out of purchasing cyber insurance in 2023 as rising premium costs will continue to be an ongoing problem for the cyber insurance industry in that year.
When analysing cyber insurance trends for 2023, the combination of advanced cyber threats and the current hard economic situation means that some SMEs may be pushed out of insurance coverage completely.
Experts are of the opinion that the cyber insurance market will eventually attain some kind of stability despite this short-term trend, adding that it will take time to find a happy balance between making profit, sustaining business risk, and keeping it inexpensive.
Why Cyber Insurance Premiums Are So High?
Increasing Demand
Organizations large and small have hurried to purchase cyber insurance in recent years as cyber-attacks become more advanced, effective, and secretive. Although taking preventative measures and purchasing this insurance is a wise decision, it has surely increased pressure on the insurance providers to meet the needs. The disparity between supply and demand drives up the cost of cyber insurance.
Losses In The Cyber Insurance Industry Are Rising
Like all insurance products, cyber liability insurance is a commercial proposition. There are more claims and payouts due to the rising demand for this insurance. As was already mentioned, there have been more cyberattacks, which has resulted in a rise in claims. In the end, all of these things cause losses for insurers. By raising the premiums, they can reduce their losses, among other things.
The Cloud And Remote Work
The popularity of remote and hybrid work has stretched the traditional network’s capabilities to handle sensitive data. As a result, there are more chances of data breach and leakage, which increases claims and ultimately premiums.
Ransomware- An Expensive Cyberthreat
Cyber threats come in a variety of price ranges. One such cyber threat that carries a significant level of risk and expense is ransomware. As a result, insurance companies charge higher premiums to cover such dangers.
Assessing Risk
Cyber security experts believe that insurers will need to alter their methods for calculating these risks in order to obtain more stable and long-term pricing for cyber insurance.
According to them, insurers will start to take into account businesses’ level of protection, what they’re doing to enhance their overall security, and how preemptively they’re identifying and mitigating threats, instead of just looking at the sensitive information a business continues to hold and the economic implications of a breach.
More importantly, how insurers quantify cyber risk will likely start focusing less on a drawn-out and complicated survey and instead begin to use tools like vulnerability detection to gain a more accurate representation of a customer’s cyber hygiene.
Expert Guidance on How to Avoid Being Affected by Exorbitant Cyber Insurance Premiums
Insurance companies urge companies to take action before buying cyber insurance. Organizations frequently need to adhere to strict security measures before being granted this insurance. However, merely having cyber insurance in place will not guarantee cyber security. These following actions not only offer a solid solution but also assist in lowering premiums.
- Implement a data loss prevention system to stop data leaks and theft.
- Applying data backup strategies
- Regular testing and the use of anti-virus and anti-malware software
- Comply with routine system updates
- Use multifactor authentication and strong password restrictions.
- Turn data encryption on
- Inform staff members about common security risks, including phishing and legal requirements.
Small firms can reassure insurers that they are taking proactive measures to protect against such dangers and are not only depending on insurance by taking the aforementioned precautions. Insurance firms are more likely to consider premium reductions if they embrace risk prevention. A favourable effect on premium costs results from investing in solutions that lower the risk of exposure and identify or lessen the effects of cyberattacks.