Compared to other insurance products, cyber insurance is still new but it’s one of the fastest-growing products. Lately, the rate of cyberattacks has increased. Many businesses are counting losses due to hackers and malware, ransomware attacks, fraud, and intellectual property theft.
The purpose of cyber insurance is to help companies recover losses experienced due to such attacks, but insurers have strict underwriting guidelines. As cyber threats increase, the need for businesses to prevent losses from cyberattacks increases too. Experts predict a booming cyber insurance sector in the next three years and beyond.
MOST COMMON CYBERSECURITY THREATS TO BUSINESSES
Some of the tips for cybersecurity beginners given by experts are to have a futuristic mind, be ready for it, and be in control of your brand. That means the business person must know the commonest cybersecurity threats to their business and take action to avoid them. As cyber attackers develop newer technologies, businesses should be ahead by creating a stronger counter technology.
The most common security threats to both micro and macro businesses globally are ransomware attacks, malware, phishing attacks, password attacks, spyware, and internal threats. It’s easier to deal with external threats. When the threat is coming from within a business, it becomes tougher to prevent it.
WHY DO BUSINESSES REQUIRE CYBER INSURANCE?
Information on essaymama.com mentions that the new trend businesses are taking is e-commerce, where companies create e-shop platforms for marketing and selling their products. Most current business transactions are done online, starting with shopping for goods and services.
Customers make orders online, open accounts, do payments, deposits, and withdrawals online. Businesses store data online including customer data, analyzing information, and supply chain management data. As businesses engage in more online transactions and data storage, the risk for cyberattacks increases.
If a major attack occurs, a business might spend money in terms of millions to recover data and bring its online systems back to running. Some of the losses could be associated with forensic data analysis, court battles, and disruption of business. Businesses might also lose revenue, their software could be damaged, and there could be a need to notify customers about the attack in the media.
Some types of cyberattacks can bring down big companies and that’s why businesses should have a continuity plan backed up by an incident response plan. Some of the plans that businesses can implement are data backup plans and cyber insurance. Even with a data backup plan, cyber insurance is important because of the big money involved during recovery after a cyberattack incident.
THE CURRENT SITUATION IN THE CYBER INSURANCE FIELD
According to Purplesec US, cybercrime statistics increased by 600 percent between 2020 and 2021. Business system networks were attacked by malware, ransomware, phishing, and spyware applications. At least 92 percent of attacks were carried out through emails while mobile variants increased by 54 percent.
Losses due to ransomware attacks were estimated to exceed $6 trillion. Recovery costs after a cyberattack averaged $11.7 million between 2017 to 2019. Further statistics show at least 47 percent of small businesses are not ready to deal with cyberattack incidents.
According to FitchRatings, directly written cyber insurance premiums rose by 22 percent while claims rose by 247 percent from $145,000 in 2019 to $358,000 in 2020. Cyber insurance represented a 1 percent market share but most insurance companies were yet to create cyber insurance products.
CYBER INSURANCE PREDICTIONS IN THE NEXT 3 YEARS
From previous statistics, records show more companies are investing in online e-commerce systems. Statistics show there is a sharp increase in cybercrimes and many companies are recording huge losses after every cyberattack. Claims are rising due to huge recovery costs and the cyber insurance field is not likely to see ease off any soon. The field expects some of these major changes.
More businesses will take cyber security insurance
According to Forbes, it’s expected that more than 55 billion devices will be connected to the internet globally by 2025. The amount of data generated by these devices will increase to 73.1 zettabytes by the same period.
Currently, serious cyberattacks are expected to increase to 26,000 daily and the greatest targets will be businesses and government data.
Already, many businesses are counting losses after they lose data due to cybercrime. Others have lost money and transactional data. To make the matter worse, some businesses are not aware they have suffered cyberattacks. Due to the reality of increasing threats, most businesses are already using cyber insurance. This trend is expected to grow in the next three to five years.
Change of cyber insurance laws
Between 2020 and 2021, the average claims per company increased by over 200 percent due to the recovery costs associated with cybercrime. Most insurers set low premiums to attract customers and weren’t prepared for such huge claims.
Now that both demand and risk have risen, businesses should expect big changes in policies, rules, and guidelines. The underwriters will be stricter before they approve claims or take on new customers.
There will be exponential growth
Many insurers were reluctant to create a cyber insurance product. The wait-and-see period is over and more insurers might introduce the new product within the next year.
With more businesses taking cyber insurance and more insurers introducing the product, the next three years are set to record exponential growth in cyber insurance.
Higher competition from cyber insurance experts
Cyber insurance products are new and compared to traditional insurance, this product involves cyberthreat. The risk is not tangible like most traditional insurance products such as fire, burglary, and accidents.
This new product demands a new level of expertise. Most underwriters will have to upskill and receive the latest training. The field will produce a new breed of insurance experts, advisors, consultants, and underwriters who will professionally handle the complex challenges of cybercrime.
The number of claims will drastically increase
Cyber attackers are continually changing tactics and developing new applications to attack more businesses. That means many businesses will likely record cyberattack incidents within the next three years. As more businesses experience cyberattacks, insurers must prepare to handle the largest number of cybercrime claims yet.
Since 2018, businesses have continually recorded an increase in cybercrime, with the highest incidents recorded between 2020 and 2021. In the same period, more businesses took cyber insurance policies, and claims increased by over 200 percent. Insurers expect exponential growth in the next three years as their client base increases.
Due to unforeseen levels of claims, cyber insurance premiums will likely increase. Insurers will create new rules and adjust the existing ones. If you’re in the market for cyber insurance, now is a good time to prepare by making sure your cybersecurity protections are up to snuff.