Ifrah Yousuf graphic of computer

Cyber-Insurance Rates Soaring Thanks to Rise in High-Cost Ransomware Attacks

Insurers have made “dramatic” increases in premiums for cyber-insurance and are considering lowering the ransom amounts they will pay.

Cyber-insurance rates are set to increase by as much as 25 percent thanks to insurance companies having to pay out expensive claims related to ransomware attacks, according to a Reuters report.

While ransomware attacks happened slightly less frequently in 2019 as compared to the year before, hackers are beginning to ask for higher payoffs and are doing more damage when they attack businesses or governments. Some cybersecurity experts have even gone so far as to blame insurance companies for exacerbating the problem, as many insurers would rather pay the ransom than deal with ongoing cybersecurity costs for their clients.

“The onus isn’t on the insurance company to stop the criminal, that’s not their mission,” Loretta Worters, a spokeswoman for the Insurance Information Institute, told ProPublica in August. “Their objective is to help you get back to business. But it does beg the question, when you pay out to these criminals, what happens in the future?”

Cyber-insurance premiums began to rise 5 percent to 25 percent late in 2019, Robert Parisi, the U.S. cyber product leader at Marsh & McLennan Companies, told Reuters. Policies often cover data recovery, legal liabilities and negotiators who can translate from hackers’ native languages, according to the report. Insurers have made “dramatic” increases but have not scaled back coverage, Parisi said.

Some insurers, like Sompo, are considering lowering the amounts they will pay for ransomware attacks against high-risk companies and require clients to pay 20 to 30 percent of ransomware claims, according to Reuters. Other insurance companies are thinking about making ransomware a separate product from general cyber-insurance coverage.

The high costs associated with ransomware attacks are also associated with the increasing amount of attacks on managed service providers responsible for the IT services of several companies, particularly hospitals and medical businesses. This means that one successful attack can encrypt sensitive data for dozens of facilities or companies at once, incentivizing the managed service provider to pay the ransom so that their clients can get access to crucial data as fast as possible.

In turn, malicious actors see that they can continue to raise ransoms and be rewarded by insurers and the desperate companies themselves.

While ransom payment can encourage attackers, it’s up to insurers to decide the cost-benefit analysis and make the right decision for all involved, according to Michael Lee, the city spokesman for Lake City, Florida, which was a ransomware attack victim in 2019.

“The insurer is the one who is going to get hit with most of this if it continues,” Lee told ProPublica. “It’s kind of hard to argue with them because they know the cost-benefit of [paying ransoms]. I have a hard time saying it’s the right decision, but maybe it makes sense with a certain perspective.”

Illustration courtesy of Ifrah Yousuf, via the Cybersecurity Visuals Challenge

About the Author

Haley Samsel is an Associate Content Editor for the Infrastructure Solutions Group at 1105 Media.

Featured

  • The Future is Happening Outside the Cloud

    For years, the cloud has captivated the physical security industry. And for good reason. Remote access, elastic scalability and simplified maintenance reshaped how we think about deploying and managing systems. But as the number of cameras grows and resolutions push from HD to 4K and beyond, the cloud’s limits are becoming unavoidable. Bandwidth bottlenecks. Latency lags. Rising storage costs. These are not abstract concerns. Read Now

  • The Impact of Convergence Between IT and Physical Security

    For years, the worlds of physical security and information technology (IT) remained separate. While they shared common goals and interests, they often worked in silos. Read Now

  • Unlocking Trustworthy AI: Building Transparency in Security Governance

    In situations where AI supports important security tasks like leading investigations and detecting threats and anomalies, transparency is essential. When an incident occurs, investigators must trace the logic behind each automated response to confirm its validity or spot errors. Demanding interpretable AI turns opaque “black boxes” into accountable partners that enhance, rather than compromise, organizational defense. Read Now

  • Seeking Innovative Solutions

    Denial, Anger, Bargaining, Depression and Acceptance. You may recognize these terms as the “5 Phases” of a grieving process, but they could easily describe the phases one goes through before adopting any new or emerging innovation or technology, especially in a highly risk-averse industry like security. However, the desire for convenience in all aspects of modern life is finally beginning to turn the tide from old school hardware as the go-to towards more user-friendly, yet still secure, door solutions. Read Now

  • Where AI Meets Human Judgment

    Artificial intelligence is everywhere these days. It is driving business growth, shaping consumer experiences, and showing up in places most of us never imagined just a few years ago. Read Now

New Products

  • Camden CV-7600 High Security Card Readers

    Camden CV-7600 High Security Card Readers

    Camden Door Controls has relaunched its CV-7600 card readers in response to growing market demand for a more secure alternative to standard proximity credentials that can be easily cloned. CV-7600 readers support MIFARE DESFire EV1 & EV2 encryption technology credentials, making them virtually clone-proof and highly secure.

  • 4K Video Decoder

    3xLOGIC’s VH-DECODER-4K is perfect for use in organizations of all sizes in diverse vertical sectors such as retail, leisure and hospitality, education and commercial premises.

  • Unified VMS

    AxxonSoft introduces version 2.0 of the Axxon One VMS. The new release features integrations with various physical security systems, making Axxon One a unified VMS. Other enhancements include new AI video analytics and intelligent search functions, hardened cybersecurity, usability and performance improvements, and expanded cloud capabilities