The global cybersecurity insurance market size in the post-COVID-19 world is projected to grow from USD 11.9 billion in 2022 to USD 29.2 billion by 2027, at a CAGR of 19.6% during the forecast period.
More SMBs than ever will buy cyber insurance. According to research conducted by Sedgwick: “Despite cybercrime being listed as one of the top concerns on the mind of SMBs, only around 15% stated that they had purchased specific cyber cover so far”, making cyber insurance the single largest opportunity for growth among carriers, brokers and MGAs for the foreseeable future. With more than 30 million SMBs in the U.S alone, according to a recent survey conducted by Inc.com, 77 percent of these firms say their growth is largely dependent on the implementation of technology across their business.
In essence, every business that is or will become digital-dependent will have cyber insurance as either a standalone policy or as an endorsement. Brokers that do not offer cyber insurance to their uninsured customers risk activating their E&O should a breach occur. At Cyberwrite we see businesses buying cyber insurance even as small as a one-person cupcake manufacturer storing customers data.
Insurance companies will require insureds to implement more security. Data breaches and other cyber incidents are expensive to mitigate and insure, and costs will continue to increase for carriers and insureds that lack an active risk management platform for these risks. The average cost to the insurer for a cyber incident for small and medium businesses (SMBs) is surpassing $150,000. For large companies, the average cyber incident reaches over $10 million. In order to mitigate those costs and to maintain a profitable book of business, carriers will require more security from businesses in order to obtain insurance. As a minimum, we anticipate anti-virus, firewall, two-factor authentication, backup, and encryption will become a basic requirement for policies that surpass five hundred thousand in limit.
Companies that experience a breach will struggle to find an affordable policy and prices will continue to go up. According to a recent report by the Government Accountability Office (gao.gov), the rising threat of a cyber event will drive an increase in cyber insurance premiums while reducing availability.
The 2021 GAO report, found that more insurance clients are opting-in for cyber coverage — up from 26% in 2016 to 47% in 2020. At the same time, U.S. insurance entities saw the costs of cyberattacks nearly double between 2016 and 2019. And as a result, insurance premiums also saw major increase. This situation prevents many businesses from getting cyber insurance at an affordable price and combined with the existing scarcity in insurance capacity in the market, prices are likely to continue to go up. Some initiatives in the market to get more capacity are on their way such as this one, seeking up to $1bn for monoline cyber re a start-up.
The use of ongoing cyber security monitoring to help SMB insureds to reduce the risk of claims will increase. In order to help customers avoid a price surge following a breach and a claim, brokers must now be prepared to discuss a bundled approach: a pre-placement cyber risk report combined with a competitive cyber insurance policy and a platform that continuously monitors exposures throughout the lifetime of the policy and alerts the insured before a breach occurs.
This approach can keep premiums from surging and potentially reduce the need for some coverage restrictions or exclusions. The right technology platform put all these tools at the fingertips of customers, brokers, and carriers. From corporates with global networks to the smallest of SMBs; using a risk intelligence and management platform provides notification to the insured of a potential issue before the attacker takes advantage of it. The platform enables carriers to underwrite policies adequately and competitively while also managing accumulation concerns. The platform also enables brokers to take the pain out of the customer application process and provide insurers with the underwriting data they need. This in turn will simplify and speed the end-to-end rate, quote, bind, and issue process
The use of automated underwriting of cyber policies using AI will continue to grow in order to enable data-driven underwriting in seconds as part of an effective rate-quote-bind process. Technology innovation is a costly and arduous task for many carrriers, and many are still late in the game in terms of cyber insurance. Carriers and MGAs that employ sound automated underwriting backed by proven technology and risk analysis capabilities enable brokers to help their customers get the policy they need, reduce the probability of a breach and keep premiums from surging. Automated data-driven solutions are key to serving the SMB market segment with a cyber insurance policy.
Nir Perry is the CEO of Cyberwrite, a cyber insurance company founded in 2017 that works with carriers and brokers globally to deliver the market with a cyber insurance policy and technology. The Cyberwrite platforms provide an enhanced digital experience for brokers, carriers, and insureds alike. Cyberwite’s 4SEEN AI algorithm provides cyber risk insights and security recommendations to insureds worldwide in real-time and on demand.
Nir has over 20 years of experience in cyber security in the insurance and banking sectors, serving Fortune 500 organizations with risk management, cyber security, and compliance services.