More companies are turning to cyber insurance to protect their organizations from the financial consequences of a data breach or cyber attack, according to a recently issued report by Marsh, which reported that 33 percent more Marsh US clients buying cyber insurance in 2012 than in 2011.
Companies also are purchasing higher levels of cyber coverage, according to the report, Benchmarking Trends: More Companies Purchasing Cyber Insurance, which said that cyber insurance limits averaged $16.8 million across all industries in 2012—an increase of nearly 20 percent over the $14.1 million average limit for 2011.
Reporting on purchasing frequency by industry, Marsh said that the services and educational sectors saw the highest increases in demand, with over 70 percent more purchases in 2012 in each of those industries. Marsh’s definition of the services industry includes professional, business, legal, accounting, and personal services firms.
Financial institutions also saw an above-average uptick in cyber purchases, which climbed 32 percent over 2011.
Bob Parisi, Network Security and Privacy Practice Leader for Marsh, said that, in general, “companies are now looking to manage their day-to-day cyber risks in the same way they do more traditional risks—through the purchase of insurance.”
Health care entities showed the lowest increase in purchases—20.2 percent.
Education and health care firms bought the lowest limits, with education firms averaging $8.1 million (down from $9.3 million in 2011) and health care facilities coming in at a $9.8 million average limit.
Leading all industries in terms of limits purchased were communication, media, and technology (CMT) companies, with average limits purchased coming in a nearly twice the average across industries—$33.4 million for the CMT group, compared to $16.8 million overall. CMT firms also saw the greatest jump in limits, which with growth of nearly 36 percent over 2011 average limits of $24.6 million.
Financial institutions has hefty limits as well compared to most other sectors, with FI insureds carrying average limits of $26 million in 2012, up from $20.5 million in 2011.
Marsh reported that overall rates for cyber insurance were essentially flat during fourth-quarter 2012, although market conditions varied significantly by company size, the report found.
Smaller companies, where demand is great and competition among insurers is strong, typically paid less for cyber coverage than larger companies, which are experiencing more severe and frequent claims, Marsh said.
A chart in the report show the change in the price-per-million falling from 2.22 percent increase in the first quarter of last year to a 0.8 percent drop in the fourth-quarter.
Although pricing is now flat, the report says that underwriters are showing a greater interest in information security practices of insureds, and that they are focused on outsourced service providers, business associates and other third parties with access to insureds’ confidential information.