Insurance In-Depth: How Much Do Premiums Cost?

Before a business purchases a cyber insurance policy, it’s a good idea to review existing cybersecurity practices and identify potential improvements. As we’ll review in this post, some of these activities could have a positive impact on insurance premium costs over time. 

The best way to understand cyber insurance premiums is to review the definitions of risk and cyber liability. Each cyber insurance policy will include various coverage options that relate to particular costs that could be incurred in the event of a cybercrime or data breach.

Cyber insurance providers develop their premiums based on a number of business and industry risk models. This helps them to develop a cybersecurity insurance product that provides adequate coverage at a reasonable cost. Cyber insurance premiums are often calculated based on a flat fee, base rate, or security assessment structure. In all cases, an understanding of the potential losses and liabilities for each area of coverage is critical. 

Cyber Insurance Areas of Coverage

The frequency and severity of cyber events are an important consideration when reviewing cyber insurance coverage for both a business and the provider. Given the large number of cybersecurity vulnerabilities that may be present, insurance providers offer coverages that support a number of different areas. These areas of coverage also address common cyber events such as data loss, cyber extortion, and payment fraud that could impact business operations. 

First-party coverage helps support direct business expenses resulting from a specific data breach or cybercrime event. Some examples of the typical areas of coverage include:

  • Crisis Management 
  • Identity Recovery
  • Forensic Investigations and Accounting
  • Loss of Business

The goal of first-party coverage is to supplement a company’s existing resources that are deployed for the identification, mitigation, and recovery from a cybersecurity threat. Since an incident could happen at any time, it is important for businesses to develop robust internal processes for crisis management and data recovery. 

Third-party coverage is used to mitigate expenses that may result from litigation or regulatory penalties that can be assessed as the result of a data breach or crime. Some common areas of liability covered by cyber insurance include:

  • Network security liability
  • Electronic media liability
  • Unintended defamation
  • Copyright infringement 
  • Privacy rights violations
  • Payment Card Industry (PCI) fines

Some cyber insurance policies offer extended services or a-la-carte items that can be used to customize a particular plan. All of these coverage areas combined will make up the cyber insurance premium quote that is provided. 

Factors That Impact Premium Costs 

In addition to the desired amount of coverage, there are also a number of business factors that can impact a cyber insurance premium. Some of these factors are related to large-scale trends, while others may be specific to a particular business. In simple terms, these items are related to either business categorization or security practices. 

Business Categorization

In order to understand a company’s operation, a cyber insurance provider will usually ask a series of common questions. This will help them identify the industry, location, and size of the business. The risk of a cyber event may be greater or result in higher costs in industries such as healthcare that manage large amounts of sensitive customer information. 

Security Practices

Insurance can help mitigate a large amount of the potential costs incurred from a data breach or cybercrime. That being said, it is ultimately the responsibility of each company to prepare for and respond to a cyber event. Companies that develop an incident response plan and strong written cybersecurity procedures can improve their ability to recover from a business disruption. Some specific security practices that may impact insurance premiums include:

  • Presence of an incident response plan
  • Website and online security 
  • Data encryption practices
  • Password management policies
  • Payment card controls 
  • Digital media backup and handling
  • Software updates and patches
  • Amount of sensitive data
  • Antivirus protocols
  • Firewalls and VPNs

Each of these practices could be assessed to understand a business’s underlying approach to cybersecurity. Loss factors may also be directly related to business disruption, and many companies also manage their own security audits at regular intervals. Protecting sensitive information and controlling access to physical and digital resources is directly related to areas of coverage within cybersecurity policies. 

Cybersecurity has become an important focus for businesses of all sizes. Since a cyberattack or data breach can require significant resources and capital during recovery, insurance remains an affordable way to balance these risks.  Understanding your company’s cybersecurity practices, risk factors, and potential liabilities will help you find a cyber insurance policy with a reasonable premium that meets your most critical security need. 

Zeguro is a cyber safety solution and insurance provider for small to mid-sized businesses (SMBs), offering a comprehensive suite of tools for risk mitigation and compliance, as well as insurance premiums that are tailored to the size, sector and profile of a company.
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Luis Marte
Written by

Luis Marte

Marketing Lead

A believer in the value and effectiveness of creative, out-of-the-box go-to-market strategies and innovative marketing campaigns designed to improve awareness and generate high-value leads.

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