In recent years, the surge in cybercrime has posed significant threats to businesses of all sizes. With data breaches costing an average of 4.45 million USD in 2023 alone, the pressure to get cybersecurity insurance has never been more intense. Research indicates that cyber insurance premiums could hit $23 billion by 2024, with U.S. businesses expected to shoulder half that cost, so acting early is critical. Cyber-attacks don’t just financially hurt your business; they can damage your reputation and erode customer trust if proper protections are not in place.
This is where Managed Service Providers (MSPs), like IT Solutions, can help.
Partnering with a trusted IT provider can decrease your cybersecurity risk, which can lower your insurance premiums. Below, we’ll discuss how cybersecurity insurance works, the top factors that influence premiums, and strategies to lower them with an MSP by your side.
Understanding Cybersecurity Insurance
Cybersecurity insurance, often called cyber insurance or cyber liability insurance, provides financial protection against the damage of cyber incidents. It includes a range of coverage, including but not limited to incident response, data recovery, litigation, compliance audits, and system repair.
Cyber threats have steadily increased over time, so cybersecurity premiums have risen with them to keep up with increased risk and demand.
Navigating cybersecurity insurance can be complex, but understanding the factors affecting your premium and learning how to reduce risk with help from a professional can simplify the process.
Factors Influencing Cybersecurity Insurance Premiums
In order to lower cybersecurity insurance premiums for your business, it’s essential to consider the key factors influencing the likelihood of your business facing a cyber-attack and determine how severe it could be. Knowing where your business stands in these critical areas is crucial to getting the right coverage at a fair price since insurance companies examine these factors closely when completing security risk assessments.
If you’re wondering how much you should pay, remember that prices can vary depending on your industry and business type. For example, a family-owned restaurant is much less risky than a large hospital that must safeguard thousands of patient records.
- Cybersecurity Risk Profile: A business’ risk profile depends on industry, technological complexity, and past cybersecurity incidents. Large financial corporations with a history of data breaches will pay higher premiums than retail stores with few online transactions. Similarly, a hospital storing sensitive medical records will pay higher premiums due to the heightened risk associated with protected health information (PHI) identified by HIPAA.
- IT and Cybersecurity Infrastructure: The strength and maintenance of cybersecurity systems are pivotal in determining insurance costs. A robust system with advanced firewalls, encryption, multi-factor authentication (MFA), and intrusion detection systems pay lower premiums since the risk of compromise is lower. A weak system with outdated software and few precautions in place is more susceptible to breaches and, therefore, pays higher premiums.
- Human Error: Your cybersecurity is only as good as your employees are, and unfortunately, people make mistakes. Cybercriminals frequently exploit employees to breach systems and compromise sensitive data. They do this through phishing emails, hacking weak passwords, and unsecured Wi-Fi connections like those in public spaces or unsecured home networks.
- Regulatory Compliance: Regulatory compliance demonstrates a company’s commitment to maintaining high standards of security and risk management. For healthcare practices, this means adhering to HIPAA standards that ensure sensitive patient data is protected. For law firms, this means adhering to PCI compliance, which protects client financial information when processing credit card transactions.
Strategies to Reduce Cybersecurity Insurance Premiums
Once you understand your risks, you can develop a strategy to mitigate them. This starts with taking many proactive steps, often with help from a managed service provider. Here are some of the strategies an MSP will incorporate into your business plan to ensure risk mitigation. Partnering with an expert who understands your business’s specific needs and the necessary IT adjustments can lead to significant savings by tailoring solutions that align with your company’s goals and security requirements.
- Implementing Robust Cybersecurity Measures: Implementing robust cybersecurity measures is essential for reducing insurance premiums. Strategic cybersecurity measures often include multi-factor authentication (MFA) implementation, conducting regular security risk assessments, and preventing data loss. Routine security risk assessments and data backups help companies stay ahead of emerging threats and maintain a strong security posture, ultimately lowering cyber insurance costs.
- Employee Training and Awareness: Regular cybersecurity training teaches employees about the latest threats, like phishing and malware, and empowers them to mitigate risk. When employees prioritize cybersecurity, they’re more likely to follow security rules and feel comfortable reporting issues, rather than feeling embarrassed or scared that they may have compromised security. Creating a culture where security is important makes it easier for everyone to follow the rules and report problems openly, leading to a better cybersecurity posture.
- Efficient Incident Response and Disaster Recovery Plans: Having a clear incident response protocol reduces confusion and ensures readiness to handle incidents effectively, lowering the risk of damage and, therefore, premium cost. For example, when a company detects suspicious activity, they must isolate affected systems and investigate the root cause to prevent future occurrences. Ineffective incident handling occurs when organizations lack clear response protocols or fail to detect and respond promptly, leading to prolonged downtime and financial losses.
- Proactive Regulatory Compliance: Insurers often offer discounts to organizations that can provide evidence of robust compliance with cybersecurity regulations. This includes providing documents like audit reports and security assessments demonstrating a commitment to managing risks effectively. Failure to comply with regulations can result in penalties, making it crucial for organizations to maintain robust cybersecurity measures.
- Managing Third-party Risks: Managing third-party risks involves completing detailed vendor risk assessments and incorporating cybersecurity requirements into vendor agreements to minimize legal and financial risks. Working with legal experts helps create thorough cybersecurity clauses that are aligned with your risk tolerance and follow regulations. Identifying and mitigating the dangers posed by high-risk vendors is crucial, as they can introduce security vulnerabilities or non-compliance issues, potentially leading to data breaches, supply chain attacks, regulatory fines, and reputational damage.
How IT Solutions Can Help
At IT Solutions, cybersecurity is at the heart of our partnership with you. We empower you to safeguard your networks and critical assets, ensure regulatory compliance, and gain visibility into your IT environment. By leveraging solutions like Security as a Service (SECaaS) and DataVault™, our clients benefit from multi-layered protection and robust backup services tailored to their needs, reducing their cyber risk and, ultimately, lowering their cyber insurance premiums. From employee training and awareness to fortifying your business with proven solutions like MFA, our proactive approach and tailored offerings have you covered, so you can enjoy reduced cyber insurance premiums and experience the peace of mind you deserve.
Ready to protect your business from cyber threats and lower your cyber liability insurance premiums? Contact IT Solutions today to assess your cybersecurity risk, learn more about what fortified cybersecurity looks like, and discuss cyber liability insurance. If you’re a client and would like to discuss further, please reach out to your Strategic Advisor.
While IT Solutions doesn’t offer cyber liability insurance, our team can assist in guiding you through complex plans offered by 3rd parties and help you decide on the best solution for your company.
Previous Articles in the Cyber Liability Insurance Series:
- Cyber Liability Insurance: A Professional Guide
- Cyber Liability Insurance: What Should You Expect to Pay?
