Blog Post

How to Negotiate the Best Cyber Insurance Policy

August 14, 2023

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Most companies will quickly accept the insurance provider's first offer when negotiating cybersecurity insurance policies. Although a relatively new component of the insurance sector, providers have still been conducting cyber assessments and offers for years and are the so-called expert.

However, this way of thinking costs enterprises thousands, if not millions, of dollars a year in deductibles. Despite having access to all of the necessary information, these entities don't know how to leverage their insights to pay lower deductibles in a language insurance providers understand.

Fortunately, a simple software solution can mitigate this communication breakdown, ensuring your company doesn't waste resources on worthless, overpriced policies. 

Speaking the Same Language: Quantifying Risk

“You need to understand exactly what coverages your company needs and the appropriate deductible,” explained Kovrr’s Director of Product Management, Amir Kessler, in his latest product demonstration. An enterprise can come to this understanding by assessing its risks and the probability that those risks will occur. 

This risk assessment can, of course, be conducted internally. But when bringing those findings to the negotiation table, your organization needs to be able to “speak the same language” as the provider. Simply put, security teams need to understand, in financial terms, the key findings of internal conclusions. 

The Top 3 Benefits of Financial Risk Quantification Software

Cyber risk quantification (CRQ) software can help you to comprehend the monetary implications of your system’s vulnerabilities. With these insights, your organization can enter the insurance policy negotiation on a more even footing and leverage its existing security assets to a greater extent.  

1. Visualizing Financial Exposure

Using Kovrr’s robust risk quantification platform, Kessler revealed how a company could review its estimated financial damage - due to cyber events - in the upcoming year. The platform offers a full distribution model, offering the net loss amount as it relates to the probability of it occurring.

Evaluate your organization's cyber risk exposure according to a wide range of crucial metrics.

The model calculates this distribution based on a Monte Carlo simulation. The simulation creates roughly 10,000 possible projections for next year’s cyber activities. Each projection varies in its damage level - ranging from moderate to severe. 

“By simulating 10,000 ways in which next year can play out, we can cover all of the options that may occur,” said Kessler, clarifying the benefit of the Monte Carlo technique. Indeed, exploring a wide range of potential scenarios enables CISOs and security teams to gain a sharper understanding of the likeness of both high and low-cost risks. 

2. Translating Exposure Into Financial Terms

Kovrr’s CRQ solution also has the capability to take a company’s risk potential and measure it against its current insurance policy coverage, revealing whether or not the policy is cost-effective. In the product demonstration, the audience inspected a fake company’s (CloudSoftware Inc.) coverage. 

The results were astounding. 

The assessment revealed that there was only a 13% probability that CloudSoftware Inc.’s annual losses would exceed their deductible. In other words, 87% of the time, this company would bear the financial brunt of its losses. Their deductible is $4.5 million, while their average annual loss is projected at only $2.7 million. 

Ultimately, on an average year, CloudSoftware’s policy isn’t even helping them to subsidize the cost of cyber risks because the amount they are expected to lose is lower than their deductible. 

3. Breaking Down the Policy Into Different Coverages

Cyber policies aren’t merely generated on a company wide-level. Instead, they’re typically segmented based on different coverage areas with varying degrees of risk. For example, because the probability of your enterprise suffering from data theft is much less than if there were a minor business interruption, the terms and conditions (and coverage costs) could vary substantially. 

Kovrr’s solution divides these coverages into six categories: business interruption, third-party service provider failure, data theft and privacy, third-party liability, regulation and compliance, and, finally, ransomware and extortion. 

Amir Kessler demonstrated that security teams could filter out the relevant risk exposure and its potential cost to the company based on the category. Enterprises can explore the likelihood of that specific event occurring and whether the financial impact will exceed the deductible. If it doesn’t, the company would do well to cut that component from the overall policy. 

Leverage Insights at the Negotiation Table

Using a cyber risk quantification platform, your enterprise can gain invaluable data that’s presented in a way easily understandable by your internal stakeholders and potential insurance policy provider.

If these insurance providers offer your organization a deductible you believe isn’t cost-effective, you can leverage the gained insights to make a more data-driven counteroffer. Your cyber insurance policy should be economical, providing you with the financial support your operations deserve.

Start Quantifying Risk With Kovrr

Policy terms and conditions need to be discussed in financial jargon; it’s the only language an insurance provider and key stakeholders will understand. Fortunately, the translation process from risk to monetary value is seamless when your company employs risk quantification software. 

Kovrr’s cyber risk quantification platform is easy to use and offers companies the in-depth information they need to speak the language of their insurance providers. 

Watch the webinar today and schedule your free customized demo to learn how Kovrr can help you leverage your risk exposure and get an insurance policy that’s worth it.

Amir Kessler

Director of Product Management

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