06 May 2022
Posted in Insurance
Cyber insurance prices still too high as almost 30% of small-medium UK businesses cancelled policies in 2021 to cut costs, says GlobalData
While interest in cyber insurance is certainly increasing—especially amid heightened risk due to the Russia-Ukraine conflict and working from home—the price is likely to still be too high for UK small-to-medium enterprises (SMEs), according to GlobalData. A survey by the leading data and analytics company notes that 38%* of these businesses think it is unlikely that they will be targeted, while 29%* cancelled their policies in 2021 due to cost cutting.
Ben Carey-Evans, Senior Insurance Analyst at GlobalData, said: “The results from GlobalData’s 2021 SME Insurance survey suggest that SMEs are aware of the threat, but don’t feel it is applicable to them. We expect that, while interest in cyber insurance will continue to rise, price will continue to be a key barrier to cyber insurance uptake in the near future.”
GlobalData notes that, as risk of attack increases, so will the premiums. Given that cutting costs is one of the leading causes for policy cancellations, this will be a significant obstacle.
Carey-Evans continues: “Even if UK SMEs do become more concerned about their business being targeted by cybercriminals, they are unlikely to be willing to pay even higher premiums to protect themselves. It is a difficult product for insurers to price, as unlike other products, they cannot look to limit risk—any SME could be hit with a cyberattack at any time, and the costs can be significant.”
The Ukraine-Russia war has only heightened potential cybersecurity risks. The UK’s National Cyber Security Centre (part of GCHQ) advised all organizations in the UK to bolster their cybersecurity in March 2022, specifically due to the increased risk posed from the Ukraine-Russia war.
Carey-Evans adds: “As there are more and more high-profile attacks, the idea that anyone is vulnerable—even SMEs—should spark increased uptake of cybersecurity insurance. However, the issue of pricing will remain at a time where SMEs are already struggling with a difficult economic environment.”
*GlobalData’s 2021 UK SME Insurance Survey carried out in Aug–Sept explores SME behaviors, purchasing preferences, and attitudes across commercial insurance products, including general insurance and employee benefits. It also explores emerging risks, relationships with brokers, and SMEs’ service expectations. Every company involved in the survey fits BEIS’ definition of an SME as a business with fewer than 250 employees. Respondents are recruited via an online panel, with 2,001 businesses surveyed in 2021.