While the average total cost of risk last year softened, cyber insurance costs saw a significant increase instead, one recent survey has found.
Advisen’s RIMS Benchmark Survey for 2018 found that despite record-breaking natural catastrophes, the average total cost of risk (TCOR) saw a 3% drop last year – reflecting a four-year trend of decreases. Specifically, TCOR decreased from $10.07 per $1,000 of revenue in 2016 to $9.75 per $1,000 of revenue in 2017.
The decline was driven by decreases in property, liability, workers’ compensation, management liability, and professional liability costs, RIMS said. A drop in overall risk management administration costs was also suggested as a factor in the decline of TCOR.
“Market conditions are favorable for insurance buyers,” commented Advisen co-founder and chief strategy officer David Bradford. “A competitive insurance market resulting from a chronic overabundance of risk capital strongly contributed to TCOR decreasing steadily since 2013.”
Interestingly, the survey found that cyber insurance is the only category that did not show any price softening.
According to the survey, the average cost of cyber insurance per $1,000 of revenue rose 33% in 2017, to $0.28, up from $0.21 a year earlier. It was also found that average insurance premiums per employee increased by 9%. Advisen additionally noted that over the last six years, the proportion of companies purchasing cyber insurance has increased from 35% in 2011 to 65% in 2017.
RIMS said that cyber liability coverage – originally a part of E&O coverage – is increasingly becoming more specialized and complex. Of the various types of cyber liability insurance, data breach coverage is the type most sought after by businesses, followed by cyber business interruption, cyber extortion, funds transfer fraud, and system failure.
CFO reported that the education, banking, and healthcare industries were the top buyers of cyber insurance in 2017.