It’s time to renew with your insurance carrier. Before making the final commitment, you should consider a number of factors. Unfortunately, in these risky times—pandemics, war, cyberattacks, supply chain issues—organizations must seek out proactive risk management to protect personal assets, income, and reputation.
The impact of these factors on business has been felt worldwide. Challenges facing today’s workplace include reductions in personnel, less emphasis on health and safety guidelines, and a muted effort in adhering to regulations. It has gotten to a point where organizations must manage both existing and emerging risks so they can be ready for unforeseen events. Implementing proactive risk management strategies into your company’s infrastructure will enable you to improve the probability of successful claims outcomes.
Among the major issues faced by risk managers today is the hardening of the property and casualty markets coupled with supply chain disruption, ultimately causing a spike in pricing and a scarcity in policy availability.
And though the COVID-19 pandemic is slowly fading into the background in many areas around the globe, its effects remain present. The pandemic changed the landscape of the insurance business while magnifying the industry’s overarching issues. A prominent example is the increased use of cloud technology and the rise in data breaches and cyberattacks
Cyber threats and aggressions are having a large impact on business culture. In 2021, there was a major uptick in cyberattacks, marking yet another difficult period for the cyber insurance marketplace. During that time, businesses witnessed a 50% increase in such attacks on a weekly basis, and according to IBM’s Cost of a Data Breach Report (2021), the average total cost of a data breach increased to $4.24 million.
In the United States alone, there was a 127% increase in ransomware attacks, with the United States Treasury Department reporting that the average ransomware transaction per month in 2021 was a staggering $102.3 million.
Unfortunately, cyberattacks are showing no signs of going away. Right now, the conflict between Russia and Ukraine is a concern for American officials who fear that the United States will see an even greater rise in Russian state-sponsored cyberattacks on businesses as a direct response to the United States imposing strong sanctions on Russia in support of Ukraine.
As the frequency and severity of these attacks grow, more organizations are turning to cyber insurance for protection from these malicious instigators Though cyber insurance is becoming an imperative coverage for businesses, growing demand paired with a surge in attacks means that carriers have less appetite for cyber risk.
As of January 1, 2022, the cyber insurance loss ratio for 2021 could go as high as 80%, and this is before accounting for all of 2021’s losses. In fact, this year, policyholders can expect to see 15%–50% rate increases.
Policyholders can also expect to undergo an even more demanding underwriting process. What’s more, savvy insurers have become extremely particular with their risk selection, which means that policyholders need to be able to answer more questions and provide documentation about their cybersecurity programs.
Carriers are currently taking a closer look at these key areas during the renewal process:
- Incident Response Plans in Place: Carriers are looking more closely at an organization’s incident response. In the event of a cybersecurity breach, having a response plan ready to go illustrates to the insurer that potential losses will be easier to recover and cost them less money. If you have experienced a breach and are up for renewal, you need to be able to review with your carrier your remediation process and prove that you were able to rectify the situation.
- Vendors’ Cybersecurity Posture: In 2022, carriers are beginning to look at third-party vendors and their security measures. More often, policyholders are having to show that they and their vendors have the appropriate cybersecurity protections in place to reduce the possibility of a loss. This is especially important in situations where a third-party vendor handles sensitive information.
- Employee Cybersecurity Education: With 88% of data breach incidents caused by human error, it’s no wonder carriers want to see policyholders have employees regularly undergo cybersecurity training. This crucial training should not only teach employees how to identify popular attack types but also simulate attacks so that employees don’t fall for the real thing.
Keep in mind that if you are unable to prove that you have the right cybersecurity measures established and/or have experienced cyber events in your business, you may find it difficult to get coverage these days. Partnering with an experienced broker that can help implement a cybersecurity strategy to better position a business’s risk profile to underwriters is crucial to helping you secure the right coverage.
Concerned and have questions? Connect with us today to learn how we can give you the right tools and information to help your business create a plan for proactive risk management.