In recent years there has been a marked increase in cyber-criminal activity. Put simply, as technology advances, so too do the skills of those seeking to exploit it. The growth of IoT provides ‘bad actors’ with more devices and connections to target, allowing them to become more sophisticated. These developments have contributed towards a huge uptake in cyber insurance in recent years. Now though, victims of ransomware attacks have begun to pay. Attacks and breaches now dominate the IT security news headlines. It stands to reason then that insurers must act, so here we look at changes to cybersecurity insurance in the wake of this rise in cyber-crime.
Top Tip: Check your cybersecurity insurance policy today
We would recommend a call to your broker, as the previous terms are almost certainly going to be different. Ask about new services too, and of course ensure that you have robust cybersecurity practices in place. This will be subject to higher levels of scrutiny moving forwards, and rightly so. If you need help or advice on that, or you would like an evaluation, contact us today.
The cybersecurity insurance industry gathers momentum
In line with the acceleration in cyber-crime, cyber insurance has experienced a fertile period. More policies than ever before have been issued, and the amounts of protection available have increased. In 2020, according to sources at Harvard Business Review, the first $1 billion cyber insurance programmes were launched. This is not difficult to imagine when you see the results of recent cybersecurity-related surveys. For example, the Hiscox Cyber Readiness Report 2021 revealed a 50% year-on-year increase in 2019 for cyber losses. It also revealed that businesses were devoting more resources to cybersecurity than ever. Further key findings are as follows:
- 2020 saw more companies targeted by criminals than in the previous year
- Of those suffering attacks in 2020, more than a quarter (28%) were targeted over 5 times
- The companies who took part revealed that they allocated 21% of their IT budget to cybersecurity (this was up 63% when compared to the previous year’s survey)
- 59% of businesses with 250+ employees felt more vulnerable to cyber-attacks since the start of the Covid-19 pandemic
Coronavirus has certainly had a huge impact on most, if not all sectors. Organisations the world over have lost vast sums of income, with many succumbing to their losses. It has subsequently made some view cyber insurance as a luxury. Yet there is another, far more critical issue to cybersecurity insurance that is ‘changing the playing field’.
Ransomware and the cybersecurity insurance landscape
Ransomware is perhaps the foremost cybersecurity threat. According to CRIBB Cyber Security’s Patrick Carolan, “it (ransomware) has achieved a lot of success in recent years. Ransoms were set at relatively low amounts and were largely ignored. Nowadays, I believe that the average is over $100,000. They are often paid now too, which means that insurance companies must adopt a more robust approach.”
During the period of growth, many cyber insurers retained 60% on every dollar paid in premiums. Security frameworks, policies and procedures of clients were often not thoroughly examined. Their level of cybersecurity awareness was largely overlooked. Carolan foresees a huge change in this:
“A lot of the people in cybersecurity insurance are leaving that area of the industry. Some are point-blank refusing to insure for ransomware. The ones that remain are therefore charging a lot more and insuring for less. They are also asking for a much higher level of proof of strong cybersecurity controls before issuing any policies.”
The future of cybersecurity insurance
It is difficult to predict exactly what lies in store for those seeking cybersecurity insurance. However, it does seem likely that:
- Premiums will be far higher
- Coverage will shrink
- There will be fewer outs
- There will be limited options
- Stronger requirements will be enforced
Carolan points out the ransomware attempts at cyber insurance companies as being key. “Cyber-criminals can uncover how much ransom they could demand from potential targets. They can find this information directly or through the cybersecurity insurance companies they use. It is vital then to protect cybersecurity policies. I would say you should remove them altogether from areas where they could be found.”
There have been cases where insurance companies have stated they will not pay any ransoms. Subsequently, they have been the victims of attacks. It is clear then that the industry is in a vulnerable position right now.
Top Tip #2: Conduct vulnerability scans before opting for insurance
As stated previously, requirements for insurance are (understandably) becoming more stringent. Some companies are even implementing external vulnerability scans themselves. It makes sense then to carry out a scan beforehand, and CRIBB can help.