How to Reduce Premiums on Cyber Insurance Policies?

Posted on: Dec 8, 2022 | 3 mins | Written by: HDFC ERGO Team

How to Reduce Premiums on Cyber Insurance Policies?

The complexity and sophistication of cybersecurity attacks have grown in recent years. So has the frequency of such attacks. Thus, the increase in the number of headlines about cyberattacks across the globe isn’t a surprise anymore. However, this increase in cyberattacks has also resulted in a higher increase in the cost of data breaches. All these can increase the cost of securing cyber insurance for a company.

Companies that deal with sensitive information of customers or rely heavily on digital tools, need to constantly assess their policies and cybersecurity insurance. Since the cost of data breaches has gone up exponentially, insurance companies also have increased the costs of providing such coverages. This is primarily to contain additional risks and to meet the huge surge in demand.

Why Is The Cost Rising?

The cost of cyber insurance in India is on the rise for the following reasons.

● There are certain estimates which show cyber security insurance growing at 30 to 35% annually, which is the fastest among all insurance types. As more brands and companies turn digital, the growth and demand are only going to get up. The uptick in demand has resulted in slightly higher premiums.

● The average cost of payout in the case of a cyberattack has also increased in the past few years. This increases the losses that insurance companies incur. As a result, this increases the policy premiums of cyber security insurance.

● There is a considerable gap in cyber security experts in the industry. These lead to systems not being up to date, systems not being pushed to penetration tests and a higher turnaround time for fixing vulnerabilities. These expose the systems to higher risks and thus, push the cost of premiums.

● The ongoing pandemic has made way for remote working options. However, they post a separate set of challenges as it is even more difficult to handle insider threats. This also limits companies from administering cybersecurity measures and policing them as well.

● Insurance providers are seeing an increase in the loss ratio. It essentially quantifies the payouts that insurance companies have done versus the total premiums that they have received. This is another factor that had led to an increase in premiums.

Tips To Combat Rising Prices:

There are a few measures that companies can take to reduce the cost of cyber insurance policies. Here are the prominent ones.

1. Implement aframework:

One of the most mature ways to mitigate the risks posed by cyber-attacks is to establish a cybersecurity framework. When a company takes this effort, it shows to the underwriter that the company takes its cyber security quite seriously and is constantly working to enhance it. There are a few standard frameworks that companies can explore to reduce risks associated with cyber security. And adopting these frameworks shows the willingness to improve cybersecurity.

2. Effective response plan:

Irrespective of the strict measures or plans that an organisation can have in place, it still cannot prevent cyberattacks. In such cases, creating an effective response plan can greatly reduce the impact of the attack. An incident response plan to cyberattacks is a document that can be shared with insurance providers. Which again shows the readiness of an organisation to tackle such situations.

3. Multi-Factorauthentication:

Multi-factor authentication is fast becoming a norm across different organisations. It is also a requirement that some cyber insurance policy providers expect of companies. Companies have started implementing multi-factor authentication for a couple of good reasons.

The first step of most cyberattacks is stealing user credentials.

Since the subsequent attacks use these user credentials, multi-factor authentication can be quite effective in preventing malicious attacks. However, multi-factor authentication is usually seen as a hindrance to productivity. But this can be easily resolved with the help of passwordless MFA. These include the usage of biometrics and decentralized pin for authenticating individuals.

4. Zero tolerance architecture:

A zero-tolerance architecture presents a strong defensive mindset. According to the model, the identity of the user and the permissions that they have access to are regularly verified. This takes place, even after they have received access.

The model is quite effective at preventing compromise and is becoming a norm. A lot of companies have started implementing or are planning to implement the architecture.

5. Awareness training:

The cybersecurity program of a company can all be nullified if a single individual fails to adhere to them. Thus, humans can be one of the weakest links in this ordeal. Individuals usually fall into cyberattacks because they are not aware of them or cannot recognize an attack. Providing employees with adequate training to identify and respond to cyberattacks will further minimize the risks of a company.

6. Regular penetration testing:

Testing the resilience of a company’s application and network can go a long way in improving cybersecurity. Designing penetration tests and conducting them at regular intervals will help companies exploit any loopholes in their environments. Post that, adequate measures must be taken to shut down these loopholes. It allows companies to adhere to the latest policies for better protection.

7. Sturdy data backup in place:

Quite a lot of malwareis designed in a way to cause maximum data corruption. To ensure that the business is back online, companies must restore the system to a clean version before the attacks commenced. Having a sturdy backup system in place will ensure easy restoration of data.

Apart from having a reliable data backup plan in place, companies can implement a few other defence strategies. Such as updating all the systems with the latest security patches, timely updating antivirus software, keeping an eye on any sort of data leaks, etc. These measures also show the commitment of an organisation towards cybersecurity and keeping the systems safe.

8. Vendor risk management system:

A company staying vigilant might just not be enough to keep cyberattacks at bay. There is enough evidence that shows that a considerable number of these attacks could take place due to third parties that were compromised.

If a third-party vendor is vulnerable, the risk elements are passed on to other entities that they work with. It is essential to discuss and frame a vendor risk management system for all third parties. The risk assessment policies will check for any vulnerabilities in the system of the third parties. It can help companies to see if the third parties are in line with their cyber security policies. And help you with premiums for cybersecurity insurance.

Conclusion

The has never been a bigger need for cyber insurancethan it is now. And it is only going to increase in the future. Given the complexity of the issue and the ransoms involved, it might increase the policy premiums as well. Above are some of the measures that companies can implement to reduce the premiums of cyber insurance in India. And more importantly, keep their systems safe.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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