By Robert Booker, Chief Strategy Officer at HITRUST

Having looked at this evolution of cybersecurity risk management from many roles and angles over the years, I can tell you that the cyber insurance market continues to experience deep transformative change, mirroring its cyber threat and attack counterparts' growth, complexity, and prevalence. What began as a narrow offering with limited scope and availability is now a critical risk management tool for many organizations across various industries.

This blog post examines this progression to reveal significant changes in cyber insurance coverage, premiums, exclusions, reporting requirements, response protocols, and actionable insights for organizations seeking optimal coverage at favorable rates.

The early days of cyber insurance

A decade ago, cyber insurance was an emerging market marked by a lack of information and standardization, resulting in inconsistency and uncertainty. Policies were often rudimentary and viewed as an afterthought, tacked on to broader business insurance plans as optional add-ons. Coverage was narrow in scope, primarily focusing on first-party losses like data breach notification costs and some legal liabilities. Furthermore, the underwriting process was haphazard, relying heavily on self-reported data, making it difficult for insurers to quantify cyber risks due to a lack of historical claims data and inconsistent security expectations.

Cyber insurance premiums during this early era were relatively low, reflecting both the limited coverage offered and an underestimation of the severity of the risk related to a successful cyberattack. Also helping to keep premiums low were the broad exclusions and clauses that frequently left significant coverage gaps. As one example, several early-stage policies excluded acts of cyber terrorism or nation-state attacks — exemptions that remain contentious even in today's cyber insurance market. We also saw response measures delivered ad hoc, with little emphasis on structured incident response, let alone post-breach recovery. The result was a situation where policyholders lacked complete confidence that the coverage they expected would support potential losses. There was also a lack of clarity in quantifying the premiums' value in reducing risks.

Key changes in cyber insurance

Expanded and specialized coverage

As bad actors and the cyber threats they sling have grown more sophisticated, so have the scope of cyber insurance coverage and the intricate details of the policies they create. Policies can now address various cyber risks, including ransomware payments, business interruption, regulatory fines, and reputational damage.

Some insurers have even introduced industry-specific products tailored to the risks that sectors like healthcare, finance, and manufacturing face.

Rising cyber insurance premiums and stringent underwriting

Unfortunately, the surge in high-profile breaches and ransomware attacks reported across many industries and corresponding losses has driven premiums upward. According to industry reports, cyber insurance premiums have increased by double-digit percentages annually in recent years.

Insurers now demand rigorous assessments of an organization's cybersecurity posture before offering coverage, often based on proprietary control expectations. As a result, an application for cyber insurance coverage and meeting with risk analysts with different perspectives and control expectations can become a significant exercise. After completing that work, the level of coverage and the details of the clauses are adjusted to meet the insurer's expectations and risk tolerance. This activity reflects a growing emphasis on proactive risk management, with nearly every insurer recognizing that poor cyber hygiene will significantly increase the likelihood of a claim. A lack of cyber maturity can lead to more events and higher payouts for these claims.

Evolving exclusions and clauses

Exclusions for nation-state attacks remain common. However, legal disputes have prompted insurers to clarify these specific clauses.

To this end, some policies now explicitly cover certain types of state-sponsored cyber incidents, albeit with nuanced limitations. Additionally, exclusions regarding policyholder negligence have become more explicit, incentivizing organizations to achieve and maintain strong baseline security measures.

Enhanced reporting and response requirements

Insurers are increasingly mandating robust incident reporting protocols as part of the terms they define in their policies. This shift aims to reduce a cyber incident's financial and operational impact by ensuring timely breach reporting and effective response coordination. Some policies now include access to insurer-provided incident response teams, legal counsel, and public relations support, offering policyholders a more comprehensive safety net in the event of an incident.

Navigating the modern cyber insurance market

For organizations seeking a cyber insurance policy, the path to obtaining coverage — and securing the best possible terms — requires deliberate preparation, strategic planning, and proactive actions.

• Strengthen cybersecurity posture: Insurers evaluate an organization's risk profile by assessing the client's cybersecurity practices. Implementing foundational cybersecurity controls such as multi-factor authentication, managed endpoint detection and response, third-party risk management, and regular employee training can demonstrate to the insurer that the organization maintains a proactive risk management program, leading to more favorable terms.
• Conduct regular risk assessments: Organizations should perform thorough assessments to understand their exposure to cyber risks. This analysis not only aids in selecting the right coverage but also informs insurers of the client's steps to mitigate vulnerabilities.
• Leverage third-party certifications: Investments in trusted frameworks and independent assurance, such as the HITRUST certification, provide standardized, credible proof of an organization's cybersecurity posture. These certifications can improve insurability, often resulting in improved coverage and lower premiums.
• Engage cybersecurity expertise: Partnering with third-party cybersecurity firms for penetration testing and other risk-based cyber audits can independently validate an organization's risk appetite and security posture. Completing this activity with a trusted partner will boost provable credibility with insurers.
• Understand and address policy details: Reviewing policy terms and conditions will prove essential in identifying exclusions, sub-limits, and reporting requirements. Engaging brokers or legal counsel with expertise in cyber insurance can help ensure policies align with organizational operations and cyber program development and implementation.
• Monitor regulatory compliance. Given the constantly increasing regulatory focus on data protection, staying abreast of and demonstrating compliance with frameworks like GDPR, HIPAA, and CCPA — plus the many others related to your industry and location — can enhance insurability and reduce liability exposure.

Insights for advancing the cyber insurance market

After several conversations over the past several months, it is my professional view that essential attributes, frameworks, and actions must be organized and prioritized to address existing system gaps for the cyber insurance market to thrive. The following are notable areas where improvements are necessary and can lead to significant benefits and provide maximum value to all stakeholders.

• Recognize the role of structured data: Reliable and standardized data is critical to improving underwriting accuracy. Structured data frameworks will allow insurers to better evaluate an organization's risk profile before providing coverage, reducing ambiguities, and enabling more consistent pricing. When insurers can access verified and transparent insights into risk management practices, they will gain confidence in their assessments. Increased visibility and confidence directly translate to better coverage options for organizations across industries of all shapes and sizes.
• Collaborate across departments: The complexity of cyber risks necessitates cooperation between several departments, including operations, finance, IT, and cybersecurity experts within organizations. Effective communication and a shared understanding of risks between these groups will ensure that organizations can clearly articulate their risk mitigation strategies to insurers so they can make the best policy decisions possible. An interdisciplinary approach simplifies the application process and fosters precision in aligning risk assessment and policy creation.
• Create predictable and reliable risk pools: Organizations adopting credible certifications or frameworks that align with industry standards will ultimately set themselves apart in the market, presenting as better bets for the insurers faced with tough decisions around which organizations they should provide coverage. By providing demonstrable proof of their cybersecurity posture, organizations will actively contribute to a more predictable and reliable risk pool for insurers, making this decision more data-driven. This predictability benefits all stakeholders by bringing consistency to cyber insurance coverage, stabilizing premiums, and encouraging insurers to offer more competitive terms.
• Simplify the insurance process: Organizations will experience streamlined application and underwriting processes when the above measures are applied. Improved clarity and less ambiguity, in turn, will reduce the administrative burdens on organizations, especially mid-sized businesses with limited resources. Increased transparency and more efficient processes will allow organizations to focus on their core operations while meeting the insurer's policy requirements. Automating data sharing and standardized assessments are critical steps in achieving this goal.
• Drive market-wide benefits: As the industry adopts these improvements, insurers will gain greater confidence in their underwriting decisions. On the other hand, insured organizations will experience reduced overhead and better policy outcomes. Collectively, the industry will benefit from stronger partnerships between insurers and policyholders and increased maturity across the board. By leveraging reliable data and simplified processes, the industry will create a culture of a virtuous cycle of trust and improved risk management. Ultimately, we can expect to see fewer breaches as well.

The realities of strategic cyber insurance are in your hands

The future of the cyber insurance market is in the hands of organizations ready to embrace change and innovation on both the insurer and insured sides. What was once a peripheral consideration has become a key risk management tool, offering organizational resilience. Organizations must take ownership of their cybersecurity posture to capitalize on the evolving market, guided by these insights and actionable principles.

By adopting a proactive and informed approach, organizations can secure coverage that protects against financial loss and strengthens their ability to respond to and recover from incidents. Organizations are empowered to shape a sustainable and resilient future in this complex market by aligning cybersecurity practices with insurer expectations and staying ahead of policy innovations.