SAN FRANCISCO--(BUSINESS WIRE)--Founders are discussing cyber insurance more than ever, with 83% talking to their investors and boards about cyber protection often or always — a 42% increase year-over-year. The report, titled “Cyber Risk Index: Startup Edition 2023” comes from Embroker, the digital platform making it radically simple to get business insurance. Each year, Embroker examines the cybersecurity risks startup founders face and how they mitigate them.
PREVENTING A CYBER ATTACK AND PREPARING FOR THE NEXT ONE
Even as the volume of cyber attacks experienced by founders increases, nearly half of founders believe they are unlikely to encounter one themselves going forward. This likely originates from inexperience: 72% of founders series C or further reported feeling it’s somewhat/extremely likely they will experience a cyber attack in the future, compared to just 40% of seed/pre-seed and 56% of series A/B founders who say the same.
Cyber attacks are constantly evolving, and founders recognize the need to stay attune to the threat: 9 out of 10 believe malicious AI is a threat to their business going forward. However, with coverage in place, founders believe that in the event malicious AI comes for them, they are covered for it.
Founders’ concern for their businesses is surprisingly low, perhaps due to the trust they have in their coverage. Confidence in risk coverage increased 25% year-over-year, with 55% of founders believing that their policies would cover them in the event of a breach. However, concern is rising in other places: founders fear the impacts that malicious AI and disruptive technologies could have on their businesses.
“Malicious AI is already prevalent and readily accessible, despite the fact that it’s relatively new. As a result, insurance and other risk mitigation techniques must evolve to catch up,” said Embroker’s Chief Insurance Officer David Derigiotis. “Cyber attacks are vicious, no matter the size of the company. To combat these threats, we are witnessing founders progressively searching for reliable protections, including and beyond insurance policies.”
NEW BENEFITS TO OPTING INTO CYBER INSURANCE
After experiencing the benefits of basic coverage, founders are upgrading to more comprehensive packages, resulting in 90% of businesses having protection in 2023.
In the past year, founders have significantly increased their cyber protection; 39% of founders say this is a non-negotiable investment area for them, up from just 21% in 2022. Driving motivators like tension in foreign relations, inflation and hybrid workforces have fallen from the top of founders’ lists, suggesting that SEC regulations and customer trust are what companies are focused on now. They’re confident in the protections they are putting in place, but as troublesome technologies continue to surface, companies will need to adjust accordingly.
VC-backed founders recognize cyber protection as a necessity, not an option. Cyber coverage is nearly ubiquitous among startups, and founders’ motivations for purchasing it are evolving. Founders report accessing new benefits such as more easily securing funding, avoiding legal attrition and gaining customer trusts. Nearly half, 43%, said it eased their ability to secure funding, up from 36% in 2022. Many aspiring startups are purchasing coverage to prepare for the new SEC cyber disclosure regulations passed in July 2023 requiring accountability for the cyber protections of US and foreign-based publicly traded companies.
The full report is available on Embroker’s website for download here.
For the Cyber Risk Index: Startup Edition 2023, Embroker surveyed more than 500 VC-backed startup founders in the U.S. in September 2023. The survey was completed online and responses were random, voluntary and anonymous. The report explores the importance of cybersecurity protections — including cyber insurance — to startups, how their perception on the reality of cyber risk is changing year-over-year, how they are protecting their businesses from modern external risks and emerging risks like malicious AI, and what factors most influence their decision-making.
Embroker is a digital-first insurance company helping businesses manage risk with a radically simple approach. Embroker is enhancing the legacy and manually intensive technology of the commercial insurance industry with an end-to-end digital insurance platform that intelligently recommends industry-tailored coverage programs, all in minutes. Through Embroker Access, Embroker provides partner agencies and wholesalers with the capability to offer all of Embroker’s industry-leading insurance products to their customers. Founded in 2015, Embroker is headquartered in San Francisco and has raised more than $140M in funding from leading Fintech and Insurtech investors. With a Net Promoter Score (NPS) of 70+, Embroker is also the highest-rated business insurance company in the market. Visit www.embroker.com for more information.