New Study Reveals Serious Cyber Insurance Shortfalls

Security

Only a fifth of North American organizations have cyber-insurance coverage over $600,000, leaving a potentially significant shortfall in funds if they are compromised by ransomware, according to BlackBerry.

The security software developer teamed up with Corvus Insurance to produce its BlackBerry Cyber Insurance Coverage study, compiled from interviews with 450 IT decision makers in the US and Canada.

The study found that just 14% of SMBs have a  coverage limit of over $600,000.

This puts many organizations at significant risk: average ransomware breach costs are measured in the millions of dollars, according to IBM ($4.5m). The average ransom payment alone in Q2 2022 was $228,125, according to Coveware.

According to the BlackBerry study, almost two-fifths (37%) of respondents with cyber insurance said they don’t have enough coverage for ransomware payment demands, while 43% said they aren’t covered for secondary costs such as court fees or employee downtime.

Over half (59%) hope their government will cover these damages if attacks are linked to nation state actors. Slightly fewer (50%) SMBs said they hoped the government would pay up in any event.

However, it’s unlikely this would happen, leading to dire choices for business leaders. A recent Hiscox study found that a fifth of US and European businesses have nearly been rendered insolvent after suffering a serious cyber-attack in the past.

Cyber-insurers have responded to heavy ransomware-related pay-outs over recent years by increasing premiums, reducing coverage and putting stricter policyholder requirements in place.

Over a third (34%) of respondents to the BlackBerry study said they’ve been denied coverage due to not meeting specific endpoint detection and response (EDR) software requirements, for example.

“Though it might sound counterintuitive, continuing to adhere to [security] software requirements is one of the best ways to fight the ransomware industry,” said Vincent Weafer, CTO at Corvus.

“In our portfolio alone, we’ve seen a 50% reduction in the ratio of ransom demands that end up being paid. Better software adoption is a critical element in better positioning organizations to stand up to attackers.”

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