Is Your Insurance Brokerage Prepared For The Rising Demand Of Cyber Insurance?

The 21st century has been a widespread period of digitization thus far, accelerated by the recent COVID-19 pandemic. Digital tools have become the standard for our personal and professional lives in all areas, ranging from data storage to important communications.

The door for opportunity has been kicked down rather than opened gracefully. However, with digital opportunities also comes opportunities for cyber threats.

How concerned should today’s businesses be for their cybersecurity?

The answer is very. In the first quarter of 2020, the amount of DDoS (distributed denial-of-service) attacks grew by more than 278% from the year before, and more than 542% from the last quarter alone. 

We won’t get into the details of DDoS attacks and what they entail. However, the high-level concept is to overload a business’ website or digital system, taking up it’s whole capacity and preventing real customers or system users from accessing. All-in-all, it’s an expensive bill for the victim.

From a financial perspective, the global average cost of a digital data breach is $3.86 million and moving in an upward trend. By 2025, cyber threats are estimated to amount to $10.5 trillion annually.

These numbers encompass businesses of all sizes. Companies are worthwhile targets even if they aren’t large enterprises. In fact, 28% of data breach victims are small businesses.

How has the rise in cyber threats affected the way businesses are run?

While cybersecurity is a relatively new factor of business, awareness and concern has grown fast. According to Hiscox, a business allocates 21% of it’s IT budget on average to cybersecurity (a rise of 63%).

Munich Re’s Cyber Insurance Risks and Trends 2021 report found that 81% of C-level respondents think their company is not adequately protected against cyber threats.

However, only 34% of these respondents have taken action to pursue cyber insurance. In fact, 26% had no awareness of cyber insurance actions.

Source: Munich Re

What does this mean for insurers and insurance agencies?

As Munich Re’s insights state, the market understands that there is a clear problem on their hands. However, their lack of education on options and lack of guidance on insurance in this area leaves room for insurers and insurance agencies to seize the opportunity.

Further, Standard and Poor’s Corp predicts that: “Cyber insurance premiums, which now total about $5 billion annually, will increase 20% to 30% per year on average in the near future.”

The company believes that with increased reliance on digital connectivity and IoT, the financial upside of conducting a cyber attack will increase as well. Therefore, cyber insurance will become an inescapable fact of life, similar to auto insurance.

With that being said, the amount of businesses actually purchasing cyber insurance is still slim. The calm before the storm is now, and so is the perfect time for insurance agencies to educate themselves and prepare options to provide to near-future inquirers.