How do Risk Scores Better Cyber Insurance Underwriting?

Insurance CIO Outlook | Thursday, April 28, 2022

In the pursuit of offering valuable cyber insurance policies, service providers are relying on risk score calculators.

FREMONT, CA: Upgraded security measures under cybersecurity strategies have become mandatory for businesses operating in today’s hyper-connected ecosystems. However, no safeguard is foolproof when it comes to cyber threats. Thus, in addition to security measures, businesses are looking to buy cyber insurance for their companies. This has led to new opportunities for insurance service providers who are now trying to cater to a rapidly growing market for cyber insurance products. For the insurers as well, cyber insurance is a new domain, and many of the insurance firms are trying to design service delivery models. Risk scores are a valuable metric that can help insurers ascertain the level of security insurance seeking companies have and thus, result in accurate underwriting.Risk Management

Evaluations that generate qualitative reports regarding cyber risk and security are not useful enough for insurance companies. On the other hand, risk scores, which are a quantitative measure of how secure a company is against cyber threats, are much more insightful. Insurers can use the assigned ratings to get a clear picture of applicants. The risk scores are based on a wide variety of factors like a company's data management strategy, security infrastructure and teams, disaster response policies, and overall IT framework. Thus, risk scores give insurance companies a credible and objective view of a potential client company's risk profile.

In addition to the objectivity, the risk scores also enable insurance companies to conduct a comparative analysis of different companies. Deciding whether or not to underwrite an applicant can be a tough decision. By being able to compare risk scores, insurers can compare cybersecurity competencies and then offer services accordingly. Besides, insurance premiums can be tailored according to risk scores to make underwriting profitable for the service providers.

Cybersecurity issues are complicated, and risk scores give it a simplistic angle so as to make cyber insurance offerings smart and efficient.  The insured companies also get a chance to enhance security performance when they are informed of the risk scores, resulting in reduced risks both for the insured and the insurers.

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