Cyber insurance just got more expensive.
According to a Reuters report this week, the recent rash of high-profile hacking events and data breaches has led many insurers to implement significant premium increases and raise deductibles on cyber policies in an attempt to limit their risk exposure. Additionally, brokers have found even greater difficulty in securing coverage limits of more than $100 million for clients.
In an emerging market already suffering from insufficient limits and restrictive costs, these new changes have made placing risk even more difficult for brokers – particularly those working with companies in the retail or healthcare sectors.
“Some companies are struggling to find the money to buy the coverage they want,”
Marsh & McLennan cyber executive Tom Reagan told the news agency.
Average rates for retailers jumped 32% during the first half of this year alone, and many healthcare companies are seeing their premiums triple at renewal time. Deductibles are also increasing, often reaching into the $25 million territory for $100 million policies.
Perhaps most concerning is the downward pressure such high-profile hacks are having on coverage limits. Already, high-limits policies are difficult to find; the largest policy currently on the market offers $400 million in coverage, while large-scale data breaches frequently reach past the $250 million mark in damages.
And more and more commonly, insurers are turning away potential clients. Tracie Grella, the global head of professional liability at American International Group, told Reuters that the insurer reserves its high-limits policies for companies with proven network security. ACE Group, meanwhile, offers up to $100 million in coverage, but seriously reviews cyber security policies and procedures of its insureds before granting such limits.
Berkshire Hathaway also said it will be “very selective” when it comes to selling its cyber policies.
That leaves insurance brokers with a new charge – help clients secure their data first, and then shop for a policy. Newer technologies like tokenization and end-to-end encryption are particularly important, as they secure payment card transactions, said
Lockton Companies partner Ben Beeson.
“Retailers that don’t do that today are going to struggle to get insurance,” he said.
