As you (and likely your clients) have noticed, cyber insurance premiums are higher than ever.

If you have been a broker in the cyber insurance market for some time, you have seen how the market has hardened over the past couple of years. There was a surplus of coverage, low premiums, and plenty of appetite from cyber carriers in the past. However, today’s market is vastly different. Insurance providers are very picky about the businesses they insure and are charging up to several times more for that protection.

Read on to learn about two underlying factors behind the cyber insurance rate increase and what they could mean for you as a broker.

What’s Behind the Cyber Insurance Rate Increase?

The Facts Your Clients Need to Know

With rapidly rising premiums and diminishing coverage levels, many business owners wonder why they are paying more for less coverage. As their closest connection to the cyber insurance industry, you will be the person that business owners ask about their increased cyber insurance costs.

Without an excellent response to justify the increased cyber insurance cost, business owners may assume that you are simply not finding them the best policies. Having an answer prepared may be the difference between keeping and losing a client.

While there is no one factor to point to that explains the cyber insurance rate increase, there are several factors that you can highlight when business owners come asking.

Working Remotely

The first factor behind the rising rates in the cyber industry have to do with hybrid and remote working being introduced to businesses during the pandemic. When companies pivoted their employees to work from home, creating a secure online environment became far more challenging as the attack surface has increased.

When employees work from the office, they connect to a private company network, connect to on-site systems, use company hardware, and generally have a secure connection to company resources. However, working from home does not have the same security benefits. Outside company walls, employees use public networks to send sensitive information, only have consumer-levels of network security, and generally make avoidable mistakes that could result in a cyber attack.

One of the most significant cyber attacks of 2021, the Colonial Pipeline breach, was due to a network vulnerability from an employee who was working remotely. Using a virtual private network (VPN) to access company systems, their connection was compromised, and a hacker used that vulnerability to gain access to the company. From there, the hacker was able to use ransomware to extort 5 million dollars from Colonial Pipeline.

Ransomware Attacks

Between working from home and increased reliance on online systems for critical work processes, ransomware attacks are a greater risk than ever. Not only are they more common, but the ransoms themselves are growing. The average ransomware payment skyrocketed from $312,000 in 2020 to $570,000 in 2021, according to a report published by GRC World Forums.

The frequency and cost of ransomware attacks on insurance providers is another factor behind rising rates. If the average business is riskier and has a high likelihood of being the target of a ransomware attack, insurance providers have to raise their premiums to stay in the black.

What does the Cyber Insurance Rate Increase Mean For You?

Over the last two decades, cyber insurance providers have raced to expand their clientele by offering lower prices and more coverage. To “wow” business owners and sell them on the idea of cyber insurance, many insurers assumed too much risk.

While the low prices attracted many businesses and helped establish the cyber insurance industry, insurance companies are now paying for their poor underwriting in the past. Insurance providers are aggressively raising rates to balance their risk, and catch up for years of premium growth. Many insurance companies are also turning away businesses with poor cyber security measures because those businesses simply pose too much risk.

As a broker, changing cyber appetites will likely impact your services. As a whole, insurance providers are not throwing themselves at every business that comes knocking anymore. For clients who want to find insurance, strict cyber security measures are now a prerequisite for securing comprehensive coverage.

In today’s risky cyber environment and changing insurance market, you need to deeply understand each client’s risk. With cyber risk in mind, you can get down to work finding the best policies. However, assessing risk and purchasing appropriate policies is often easier said than done.

At ProWriters, we aim to make your job easier and help you outperform your competition. Our newest eBook, “Cyber Risk Management 101”, breaks down the need for cyber insurance in five easy steps that you can communicate to your clients. To get your FREE copy of our newest eBook, click here.