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It's getting more expensive to protect against cybersecurity risks. In response to increased hacking of U.S. companies, insurance firms are raising cyber premiums and limiting coverage, according to a recent report by Reuters. Many cyber insurance policies cover the cost of digital forensics, credit management, and litigation expenses.
The changes come as high-profile hacks are causing more companies, from large retailers to small law firms, to turn to cyber insurance to protect against potential hacking liability. That has left some companies scrambling for coverage, especially in industries that are seen as particularly vulnerable.
Retailers and health care companies have been particularly hard hit by the rate increases, following headline making cybersecurity breaches. Target and Home Depot both had security breaches that compromised customer information, as did the healthcare companies Anthem and Premera Blue Cross. As a result, retailers have seen an increase of 32 percent in the first half of 2015, according to a cybersecurity insurance executive at Marsh Brokers.
Companies that suffered hacking themselves have seen the costs of coverage increase by millions of dollars when it comes time to renew -- with some premiums tripling, Reuters reports. Anthem decried its new insurance rates as "prohibitively expensive" in private meetings.
Insurers aren't just upping premiums; they're requiring companies to bear more of the burden. Anthem, for example, got coverage after agreeing to pay the first $25 million in costs, while some policies have limited coverage to $100 million.
A major hack can often cost much more than that, and it's not just insurers and retailers who are vulnerable. Law firms are becoming more common targets for hackers, who seek to exploit the valuable and confidential information in lawyers' possession. In response, many firms have taken stronger security measures, picked up cyber insurance policies, and even formed an industry cybersecurity information sharing group to protect against vulnerabilities.
High profile hacks have lead to increased demand for cyber insurance. That increased demand is proving positive for insurance firms, even as insurers are paying out more claims. The cyber insurance market is expected to triple in size over the next five years, to $7.5 billion.
If there's a silver lining for firms facing greater premiums, it'll be found in their insurance litigation divisions. The increase in cyber attacks, and subsequent insurance disputes, promises to keep lawyers busy and billing. "The restrictions and terms that we are seeing in the underwriting process now will become the claim disputes we see in two or three years," said Lynda Bennett of Lowenstein Sandler told Reuters. "We definitely expect more litigation."
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.