In response to this unfortunate reality, the cybersecurity market is exploding. An abundance of new services and product offerings designed to protect applications, data, devices, infrastructure and people are continually being released, with estimates indicating that global spending on cybersecurity goods will exceed $1 trillion between 2017 and 2021.
Given the ever-rising threat levels, one of the most impactful cybersecurity products currently experiencing widespread adoption is, unsurprisingly, cyber insurance. Once reserved only for large enterprises with ample capital, cyber insurance is beginning to proliferate the small- and medium-sized business market due to its increasing accessibility, affordability and compliance benefits.
After analyzing data from a variety of our insurance carrier partners and hundreds of our small business customers, our team at CyberPolicy deduced the following 5 trends that demonstrate the significant momentum of cyber insurance:
1) Cyber Insurance Is Now the Fastest-Growing Insurance Product for Small Businesses
Due to increased cyberattack levels, chronic security gaps, and an influx of insurance contract requirements, demand for cyber insurance has skyrocketed.
Compared to the first half of 2017, this year CyberPolicy experienced a record-breaking 900% year-over-year growth in the number of policies sold, with 80% of its small business customers purchasing cyber insurance for the very first time. In Q2 of 2018 alone, 30% of CoverHound's (CyberPolicy's parent company) commercial insurance shoppers purchased cyber coverage compared to just 12 percent one year ago.
2) Cyber Insurance Is a Crucial Component for Third-Party Vendor Relationships
Based on CyberPolicy data, 80% of small businesses that are buying cyber insurance are purchasing due to contractual requirements. Historically, cyber insurance has been difficult to require of small businesses due to lack of affordability or accessibility, but in 2018 the emergence of digital-first insurance providers has drastically reduced distribution costs, allowing enterprises to more easily enforce cyber insurance as an essential component of third-party vendor contracts.
3) Digital Innovation and a Growing Customer Base Are Driving a Decrease in Small Business Cyber Insurance Premiums
In 2016, when the first small business insurance policy was broadly introduced to the market, the lowest premium for a $1 million cyber insurance plan was $63 per month. As a result of recent digital innovation and increased small business customer volume, distribution costs have decreased and information for underwriting methodology has improved. This has enabled leading cyber insurance carriers to offer even more affordable, customized insurance options for smaller companies.
Today, many businesses can purchase the same $1 million policy limit with more comprehensive coverage for just $32 per month.
4) Small Businesses Are Demanding Higher Cyber Insurance Limits and Extended Coverage
With fewer technical resources, less in-house cybersecurity knowledge, and limited capital, it’s no surprise that small businesses have become the preferred cyberattack target. In fact, data from Symantec’s 2016 Internet Security Threat Report found that 43% of phishing campaigns specifically target small businesses:
And, according to the Ponemon Institute, more than 50% of small businesses [note: link opens a PDF] have experienced some kind of cyberattack in the last year. As a result, small businesses are requesting more comprehensive insurance that includes crisis management services and business interruption coverage.
More CyberPolicy customers are also requesting higher insurance limits, with 90% of small businesses purchasing policies with coverage limits between $1 and $5 million.
5) Small Businesses Are Actively Searching for Cyber Insurance Online
As more small businesses become aware of their unique cyber risk level, and work to proactively protect their most valuable business assets, they’re going online to quickly and easily browse, compare and purchase cyber insurance plans. Digital insurance marketplaces seem to best meet the needs of smaller, emerging businesses, with a whopping 85% of CyberPolicy’s online shoppers having less than 25 employees.
While technology is understandably a driving force in business today, it also serves as a precarious link between companies. When one company experiences a cyberattack, it can impact an entire corporate ecosystem and cause a truly debilitating ripple effect.
Thankfully, the mass adoption of cyber insurance stands to raise the bar for our collective cybersecurity. In the coming years, we can expect any business with assets to protect, and long-term viability to ensure, to mandate cyber insurance as a critical business requirement.
About Ari Vared
Ari Vared is the Senior Director of Product at San Francisco-based CyberPolicy, providing small businesses with the cybersecurity advice, tools, and insights they need to protect their data, operations and reputation. A wholly-owned subsidiary of CoverHound Inc., CyberPolicy is the world’s first and only comparison site for cyber insurance, helping companies Plan, Prevent, and Insure against today’s modern threats.