How Much Should You Pay For Cyber Insurance?

The cyber insur­ance mar­ket is boom­ing. Seems like every­one wants to get a pol­i­cy to trans­fer risk. And why not? Insur­ance is a use­ful risk man­age­ment tool in so many oth­er sit­u­a­tions: Gen­er­al lia­bil­i­ty, prop­er­ty dam­age, errors and omis­sions, etc. The ques­tion on every­one’s mind is: How much for a cyber pol­i­cy?


How big is the mar­ket get­ting? Accord­ing to David Brad­ford, co-founder and chief strat­e­gy offi­cer at Advisens, an advi­sor to the insur­ance indus­try:

The mar­ket for cyber insur­ance in 2015 was $2.5 bil­lion. For 2020 it’s esti­mat­ed any­where between $5 bil­lion and $10 bil­lion. By com­par­i­son, work­ers’ com­pen­sa­tion insur­ance is a $55 bil­lion mar­ket.

Brad­ford says this is rough­ly what you can expect to pay for a year of cov­er­age:

  • For com­pa­nies with less than $500 mil­lion in rev­enue, poli­cies with lim­its of between $1 mil­lion and $5 mil­lion cost between $2,000 and $5,000.
  • For com­pa­nies with more than $500 mil­lion in rev­enue, for a pol­i­cy with lim­its of $5 mil­lion to $20 mil­lion, pre­mi­ums will range from $100,000 to $500,000.

There’s a big caveat, though: Even though about 60 com­pa­nies are writ­ing cyber insur­ance poli­cies today, in my expe­ri­ence many are mak­ing it up as they go along. Terms, con­di­tions, cov­er­ages, exclu­sions, and risk assess­ments are all over the place. Unlike a com­mer­cial fire pol­i­cy, there’s almost no stan­dard­iza­tion.

Insur­ance com­pa­nies aren’t even in agree­ment about what fac­tors indi­cate a decreased risk of pol­i­cy hold­er fil­ing a claim. And that can trans­late to high­er (or low­er) pre­mi­ums than required to cov­er the risks. At this point, it’s rea­son­able to won­der if your claim will be paid at all. The lit­i­ga­tion over cyber cov­er­ages is just get­ting start­ed.

If you want to go for­ward with buy­ing a pol­i­cy, get your­self a reli­able bro­ker and get ready to do some seri­ous com­par­a­tive shop­ping. Buy­er beware!

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