Cyber Insurance Rates are Climbing Like Crazy — Here’s How to Navigate

Cyber insurance rates have exploded — and coverage levels have shrunk — in response to the increased frequency and costliness of cyber attacks. Much like a homeowner’s insurance rates will likely increase after a nearby natural disaster, companies are paying the price for high-profile and expensive breaches. 

How have cyber insurance rates changed? Direct-written premiums collected by cyber risk insurance carriers in the United States rose by an astounding 92% year-over-year in 2021. This increase is primarily a reflection of higher rates and expanded coverage. 

Despite the increased expense, cyber insurance is still well-worth having for your organization. But, you’ll need to learn how to navigate cyber insurance differently. Here I’ve outlined why rates have risen and how your business can secure the best rates possible.

Expect Higher Premiums for Less Cyber Risk Insurance Coverage

Let’s back up, how do insurance companies make money? The general insurance business model, regardless of the type of insurance, is all about loss ratios. A loss ratio is a simple relationship between the dollar amount of premiums collected compared to claims paid, represented by a percentage. The lower the percentage, the more revenue the insurer keeps. 

The average cyber insurance loss ratio rose to 72.8% in 2021, a 25% increase from 2019. To look at it another way, insurance companies only kept roughly 27 cents out of every dollar paid in premiums, when in 2019, they kept 52 cents. That means raising rates to make up for the higher loss ratio.

The dramatic change

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