The Evolution of Cyber Insurance

Cybersecurity insurance is no longer a niche product; over half – or 53% - of all SMEs are now covered.  Why? Because SMEs are the number one target of cyberattacks. According to insurance providers, cyber insurance can minimize the impact of successful attacks by: 

• Compensating losses that result from business downtime.
• Covering the costs of replacing damaged equipment.
• Helping cover the cost of regulatory fines.
• Recouping costs associated with recovering compromised data.
• Covering ransom compensation.

Traditionally, cyber insurance policies were straightforward: You paid your premiums and received coverage against losses from data breaches with relatively simple and inclusive terms. It was acritical safety net, assuring you that the financial repercussions of a cyber incident would be mitigated.

But that simple model no longer works in today’s environment of complex, modern cybersecurity threats. With increased sophistication and frequency, insurers have been forced to reevaluate, restructure – and reprice their policies. You won’t receive an automatic payout after a breach anymore. Now your insurer wants to see the specific, proactive steps you took to (1) prevent the attack, and (2) minimize any negative impact on your business once the attack was successful.  

While cyber insurance coverage is not as simple as it used to be, the shift to “proof of effort” payouts encourages better cybersecurity practices in your business. After all, the best interests of both you and the insurer should be aligned.

How do you ensure a relatively seamless journey with your cyber insurance provider?

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Understand the Changes‍

The cost of cybersecurity breaches in small and medium-sized enterprises (SMEs) has soared in recent years. For example, the average cost of a Distributed Denial of Service (DDOS) attack is now around $52,000. As a result, insurers have revised their approach to your policy. These modern cyber insurance policies require you to demonstrate “proof of effort” in your practices before your claim can be settled. 

Today’s policy requirements can be simple or complex. It’s largely dependent on the provider. But regardless of who you choose, there are some shared requirements like:

• What security controls do you have in place? Including protection for remote workers.
• Are you using any form of multi-factor authentication (MFA)?
• What kind of network security do you have in place?
• Only 17% of SMEs encrypt their data. Are you one of them?
• Do you have an incident response plan?
• What’s the frequency of cyber awareness training in your business?

Working with a credible cybersecurity partner that offers a risk score is one simple way to meet these standards and demonstrate to your insurer that you understand your business areas of vulnerability – and the recommended solutions to address them.

Use the Cyber Risk Score Model in Your Business

Risk scores are a quantitative measure of the likelihood and potential impact of a cyber incident on your business. They’re determined through comprehensive assessments that analyze factors including network security, software vulnerabilities, past incidents, compliance, and even human elements like training and awareness programs.

Like a credit score for financial institutions, cyber-related scores allow insurers to understand the risk inherent in doing business with your business.  Having a risk score from a credible cybersecurity expert partner on hand can potentially streamline the underwriting process and provide a more objective basis for determining policy terms, premiums, and coverage limits more tailored to your cyber risk profile.

How can you improve your cyber risk score? By ensuring you meet the previously mentioned requirements with:

• Keeping your software and network infrastructure patched and up to date.
• Establishing a strong incident response plan.
• Investing in the right tools specific to your SME’s needs.
• Ensuring your team is, at a minimum, annually trained on cybersecurity best practices.

Work With a Partner to Streamline the Process

An alarming number of SMEs—29%—wait until a cyber incident has occurred before bringing on additional cybersecurity help. However, many provider solutions can fit within your SME budget and ensure your risk score is strong enough for insurers to consider. But you must take steps to identify vulnerabilities – and mitigate them - BEFORE an incident has occurred.

For example, our approach at VikingCloud is more comprehensive than most, assessing both internal security risk data and external threat data. This model means your business has a more accurate and personalized risk profile. Our recently announced CCS Advantage Program (Cloud Compliance Service) is designed to bolster your cybersecurity posture by combining PCI compliance and cyber risk management solutions.

VikingCloud’s Cyber Risk Score provides relevant insight to your organization – and to prospective insurance providers seeking proof of an impactful risk mitigation plan before agreeing to your coverage terms. A dynamic and detailed risk score serves as potential evidence of your due diligence in risk management, which can potentially lead to lower premiums and more favorable terms.

Prepare for More Changes in the Cyber Insurance Future

As threats and mitigation techniques evolve, so will the complexity of obtaining cyber insurance for your business. Some key factors to keep an eye on:

1. ‍Greater integration with technology - Future policies may require your business to integrate specific security platforms or automate data communication to insurers. ‍
2. Increased use of Artificial Intelligence (AI) and machine learning - These technologies are expected to play a pivotal role in underwriting and risk assessment.
3. ‍Regulatory influence - As the government becomes more involved in the cybersecurity practices of businesses, regulatory changes are a likely factor. This can include mandated cyber insurance coverage for certain industries or minimum standards for obtaining it.

Already, underwriters are preparing for these changes in 2024 and beyond. 56% predict an increase in cyber incidents, and 81% predict an increase in coverage costs.

Changes are coming for the cyber insurance landscape. Keep your business front and center and maintain the strongest security posture possible. By leveraging advanced technologies and more detailed data analytics like VikingCloud’s patent-pending Cyber Risk Score, you can ensure your policy providers approve of your cyber protection measures and cover any potential cyber incidents in the future.