Ever Evolving Cyber Insurance
Cyber Insurance is likely still in its infancy, but it’s safe to say that the honeymoon is over and the volatility stage is at hand. Cyber risks are increasing and Cyber Insurance must grow and change to meet the threat. Here are some of the changes I am seeing as I assist clients with their Cyber Insurance needs.
Applying for Cyber Coverage. For many years, applying for coverage had become increasingly easy… almost too easy. Answer 5 – 10 simple questions, and you are done! Now, after recent high profile events such as Solar Winds and Microsoft Exchange, insurers are again increasing the length of their applications to identify potential sources of risk. Going forward, you can expect to answer some additional questions, such as:
- What type of servers and cloud storage do you use, and are they updated regularly?
- Do you have multi-factor authentication for remote access?
- Do you maintain a business continuity and disaster recovery plan?
- Do you conduct diligence on any vendors you partner with, to make sure they have good security controls?
Going forward, you can expect these types of inquiries and more, whether you are a first-time buyer of Cyber Insurance or you are just renewing. Additionally, expect to answer more questions regarding your funds transfer controls, as this is still one of the leading causes of cyber loss.
At the end of the day, Cyber Insurers will be increasingly selective regarding who they insure.
Cost of Cyber Coverage. In addition to more carefully underwriting Cyber Insurance policies, insurers are also raising premiums to deal with increasing losses due to hacks and data theft and ransomware attacks. In general, we’ve seen premium increases over 20%+ over the last year. Depending on the classification, we have seen some premiums double. It is unclear now where the market will find equilibrium and premiums will stabilize.
Increasing Need for Cyber Coverage. Many law firms have yet to acquire Cyber Insurance protection. Certainly, no one is excited about having to purchase an additional policy. And yet cyber threats continue to grow and have the potential to damage or destroy your practice.
Here are some alarming statistics, from one of Lawyers Insurance’s most trusted Cyber partners:
- Business email compromise (BEC) incidents are up 51% over the first half of 2021.
- Funds Transfer Fraud are up 28% over the first half of 2021.
- Ransomware threats are growing in severity – in the first half of 2021, the average ransom. demand was $1.2m – up 170% from last year.
- Smaller companies are being increasingly targeted by hackers – cyber incidents are up 57% for companies with less than 250 employees compared to the first half of last year.
The bottom line is that Cyber threats may soon, if they don’t already, present a larger threat than the things for which you typically buy insurance, such as property damage, professional liability or workers compensation.
The takeaway is that technology has brought tremendous economies to small business, and law firms are no exception. Costs and needs for staffing and overhead have been greatly reduced by technology over the past 10-20 years. At the same time, insurance protection against the new risks that technology presents has become a necessary cost of doing business. Going bare on this essential protection could spell disaster.
My staff and I at Lawyers Insurance have been following the trajectory of the Cyber Insurance market for many years and are constantly updating our knowledge and seeking the best insurance carrier partners. We would be pleased to help you with your Cyber Insurance needs.
Adam Pierce is the Director of Property and Casualty Insurance Operations at Lawyers Insurance
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Adam Pierce, AAI, is the Director of P&C Operations at Lawyers Insurance Agency. For more information, contact Adam at 800.662.8843 or email@example.com.Read More by Adam >