If we learned anything last year it was that no business is immune from a cyber attack. If predictions hold true, the situation in 2015 will only get worse as cybercriminal tactics become more advanced. As a result, many businesses now consider cyber liability insurance as important as property and liability to their overall corporate insurance program, but there are still many that do not.
In fact, according to Advisen’s Loss Insights database, the cyber insurance market remains far from saturated. This is especially true with smaller businesses where cyber insurance penetration rates have barely scratched the surface. According to experts, factors contributing to the relatively low take-up rates for cyber policies include a still developing regulatory environment at the federal and state levels, a general lack of awareness of cyber-related business continuity risks, and an overestimation of corporate cyber security capabilities.
Although the cyber insurance market was slow to take off, it is gaining momentum. According to a series of Advisen surveys of risk managers, insurance buyers, and other risk management professionals, the take-up rate of cyber liability insurance has increased steadily over the previous four years. The spectacular nature by which some of the nation’s largest and most recognizable corporations were attacked last year will likely contribute to an increased interest in the cover in 2015 and beyond.
The combination of a market with huge upside potential and growing demand has and will continue to lead more carriers to offer cyber products increasing both competition and capacity in the sector. If the capacity exceeds demand in the insurance supply-and-demand equation this could result in downward pressure on prices.
We can see that after a steady increase in renewal premiums just about every month from January of 2013 to mid-2014, premiums began to trend downwards in the second half of last year. It will be interesting to see if this trend continues in 2015.
While the downward trends in renewal premiums is great for companies that already have the cover, those who are looking to purchase it for the first time are far more interested in how much coverage they should purchase and at what price. The following chart illustrates the average cyber limits purchased and premiums paid by corresponding revenue ranges.