Current Cyber Insurance Market Presents Opportunities

After years of fairly consistent price increases, the cyber insurance market is uncharacteristically stable, but that isn’t likely to be the case for long.

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In recent decades as most business functions have become increasingly reliant on digital platforms and interconnectivity in general, the cyber insurance market has grown in proportion. Of course, the threat of malfeasance and the prevalence of bad actors like independent hackers and agents of corporate and/or governmental espionage has risen as well, further cementing the foundational stature that cyber insurance has achieved in the modern company.

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With cyber insurance becoming such a both crucial and expansive component of most entities’ cybersecurity strategies at the same time that the range of threats and cyber-related exposures were ballooning, it's no surprise that throughout most of the history of the cyber insurance market, price increases and coverage restrictions have been quite commonplace, as has requiring policy applicants and holders to jump through a number of hoops in order to obtain and maintain coverage.

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In this historical context, the last year - when prices have remained largely flat and carriers have been moving away from additional coverage restrictions and strenuous coverage requirements - has been an anomalous reprieve. Further, there are indications that this reprieve will likely be temporary and short-lived barring any unforeseen factors, emerging threats, or shifts in market forces.

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Many of the insurance carriers themselves, in fact, have suggested that their cyber insurance policy prices will be going up, yet none has taken steps in that direction publicly. The expectation is that the first carrier to increase prices will catalyze the other carriers into similar action, but the first mover also risks lost market share to competitors whose prices suddenly are more favorable during the 8 months or so that it will take before all carriers have reconfigured their pricing models in response to the first mover.

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Further, given the dramatic changes that the cyber market has undergone over the past couple of years, especially in light of the deluge of ransomware claims that arose throughout the pandemic, any additional disruption within the industry will be closely watched and isn’t likely to go unnoticed by either competitors or customers. While cyber insurance policy prices have come down some from their recent pandemic peak, however, ransomware attacks are again continuing to climb, as are data privacy lawsuits and pixel tracking claims, so there’s good reason to believe that insurance carriers will respond to similar conditions with similar price hikes as they have in the past. 

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Still, despite all these market-shaping forces applying upward pressure on cyber insurance policy pricing again, many experts think that the cyber insurance market has reached a level of maturation at this point that will make it less susceptible to these forces, and any price increase that we will see will probably be less rapid and steep. For example, the underwriting process has adapted over time to put greater emphasis on network security, which has had a stabilizing effect on the market as a whole.

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In any case, both the current period of stability and the period that is likely forthcoming in which cyber insurance prices, policies, and expectations are increasing - even if less dramatically than at times in the recent past - provide opportunities for both current and would-be policyholders as well as cyber insurance brokers alike.

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Given the unique nature of each carrier’s approach to policy provisions and terms and conditions, etc. brokers can take the opportunity to update their own knowledge base on the difference between each carrier's offerings as those offerings are shaped and updated in real time, which is a service of incredible value to those new policy seekers - whether current policyholders or prospective - who may be entering the market for a new carrier as prices and coverage scopes are again in flux. 

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You can read more about the cyber insurance market and the changes that are probably in store here. 

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