Losses have become more closely monitored, and premium growth has outstripped losses incurred, thanks to companies that have made efforts to strengthen their cyber security.
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“In the last two to three months, we’ve seen a price drop from 130% [average rate increase] in December to May at 86%. That’s been down since January,” Meredith Schnur, head of US and Canadian cyber brokerage at Marsh, told Insurance Business.
Changes in market behavior also contribute to price stability. “In the last 60 days, we have seen the competition for some threats increase. Throughout 2021, we had to fight for one solution, let alone several options for the customer,” added Schnur.
New agencies in place and increased competition will occur as underwriters become more confident about cyber pricing, which will help stabilize overall pricing, Marsh’s report said.
But the number of claims can reduce other benefits. Mr Marsh said the volume and severity of his clients’ claims had increased over the past few quarters. The healthcare industry was among the most anticipated in 2021, and along with the communications, media, and technology industries made up nearly a third of all claims. The cost pressure will continue as more industries fall into the hands of cyberattacks, according to Marsh’s report.
“Cyber market cycle [insurance] has shown more improvement than any other technical or economic method,” Schnur said.
“We have to be optimistic about learning and using our information and our behavioral analysis because of the market.”
Cyber demand is still high
Despite the challenges in the market, the demand for cyber coverage is growing. Marsh said the increase in first-time buyers in the US continued last year, with consumer coverage – the number of customers who purchased cyber insurance – rising to 50% from 47% in 2020.
Canada also saw a significant increase in first-time buyers. The total number of Marsh customers who purchased cyber services was more than 20% last year compared to less than five percent in 2014. However, the Canadian market is facing serious challenges in terms of energy.
“The nature of the Canadian cyber insurance market makes it difficult to integrate software. Building a robust software requires a lot of effort; it’s market-driven, and there’s a lot of complexity in buying large software,” Schnur said.
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The limited history of cyber threats and the rapidly emerging risks in the space still make it a difficult task for underwriters to understand the frequency and cost of a major attack. While this uncertainty remains, companies that adhere to high standards of internet cleanliness will reap the rewards of their insurance claims.
“It’s a journey, and the journey never ends because there’s always a new risk. No organization has a crystal ball. The focus on resilience is where underwriters want to see change,” said Schnur.
However, strong cyber hygiene does not mean that companies will get a break from rising prices. Marsh’s report found that customers with zero losses and good cyber controls still saw their premiums rise, and companies that had not worked to meet the minimum requirements saw more expensive payments and restrictions.
Schnur acknowledged that while some classes of companies have had a slow and difficult time upgrading their cyber risk strategies, other organizations have made significant changes.
“We see the amount of work that many of these organizations have done to increase their cyber hygiene, from a security and resilience perspective. A year ago, they were at Ground Zero, and it would have been difficult for us to get help. Fast forward a year, and you can see the map that they have created for themselves. and their organizations,” he said.
“It is an encouraging story. I am [the companies] where should he be? No, not right now. But we show a good story to those who wrote about how they got from point A to point B.”