Small Business Cyber Insurance Premiums Up 7% In 2021
The increase follows a period that saw rates fall year-on-year while cyber risks ratcheted up.
Since the start of the year, cyber insurance rates have increased 7% for small businesses, according to AdvisorSmith Solutions, Inc., which estimated organizations of this size that are considered low-risk see average annual cyber insurance premiums of $1,589 for $1 million in coverage. For midsize and large businesses, those increases were closer to 20%.
Currently, carriers are attempting to realize multiyear corrections in a single year, according to Amwins, Inc., which projects continued premium growth into 2022. Unlike other hard insurance markets, however, cyber differs as capacity continues to be available, albeit with reduced availability of maximum capacity to individual accounts.
The specialty insurance distributor noted fewer markets are willing to offer $10 million limits, and most accounts that purchased a $10 million limit from a single carrier in 2020 are seeing those limits cut in half.
AdvisorSmith reported health care and education were the sectors most impacted by limit reductions.
Additionally, education along with municipalities, continue to be prime targets for ransomware attacks, Amwins reported, as both are budget-driven sectors with fewer funds to earmark for cybersecurity. Both also serve a large number of people, so interruptions can be especially problematic, further enticing cybercriminals. As a result, some carriers are pulling out of these industries. Those that remain are selective or have initiated a moratorium.
As extortion demands from ransomware continue an upward trajectory, limit adequacy could become a problem, according to Amwins, which noted benchmarking appropriate limits is not possible due to the level and continued growth of ransomware demands.
Ransomware has been the biggest claims driver in terms of severity and frequency during the past year. In 2020, ransom demands paid by companies increased 311%, according to AdvisorSmith.
Along with the growing threat posed by cybercriminals is an apparent growing awareness. In 2016, around 2.2 million cyber insurance policies were written, according to AdvisorSmith, which reported there were 3.6 million policies written in 2019. Further, according to data from a leading insurance broker, the number of clients with cyber insurance grew from 25% in 2016 to just under 50% in 2020.
From: P&C Journal