Cyber Scores – How Analytics Are Changing Cyber Insurance


Some cybersecurity experts in the insurance industry are advocating for cyber scoring as a way of using analytics to quantify the risk of cybersecurity breaches.

Cyber insurance premiums – coverage against the liability of breaching cybersecurity defenses – are expected to grow from $2 billion to about $20 billion over the next ten years. Cybersecurity breaches are occurring more frequently, and the repair is costing more than ever.

Yet, underwriting for such insurance is still dependent on expert review, which is very inefficient, given the scope and complexity of the problem. That is why market pressures will lead to more quantitative risk assessments using analytics, according to cyber experts.

Cyber Scores and Credit Scores

Credit scores are a similar mechanism and show how such cyber assessment would work. Credit scores are now in common use because they are better quantitative tools for evaluating risk. Banks use credit risk scoring algorithms to underwrite loans, including credit cards. Such scores give a more consistent take on consumers across different lenders. They improve transparency and risk management. Having such scores, which are continually updated, allows banks to monitor credit quality on an ongoing basis and keep track of risk.

The credit scoring also allows banks to change their underwriting criteria as needed to maintain the credit quality that is in line with their goals and tolerance for risk. It also allows for pricing based on risk.

As credit scores have led to a total makeover for risk management, cybersecurity analytics could do the same for breach insurance underwriting. New technologies will allow quantitative, empirically based analytics to play a big role in enhancing predictability for breach underwriting.

Cyber risk scores that use quantitative, empirical methods will have a predictable correlation to outcomes. Such methods will use information from a variety of sources to enable an estimation of the risk of a breach for a particular organization.

These breach score indicators can be looked at in the same way as credit scores. They are data-driven indicators of the likelihood of cybersecurity breaches – showing the correlation between exposed IT assets and an actual cyber breach – in the same way that credit scores are data-driven indicators of consumers’ credit performance.

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