Steering Through a Transitioning Cyber Insurance Market

By: Michelle Chia | March 19, 2025

Michelle Chia has two decades of cyber, technology, and professional liability insurance experience. She spent the past ten years building teams that experienced triple digit growth while optimizing operational efficiency, developing innovative and customer centric products and services, and engaging in public private partnership to advise on policy and to build resilience. Prior to joining AXA XL as the Chief Underwriting Officer for Cyber, Design and Select Professionals in the Americas, Michelle was the Head of Professional Liability and Cyber at Zurich North America, which became a top ten cyber insurance carrier. Michelle graduated Tufts University with a Bachelor of Arts in Economics and a Bachelor of Arts in Child Development. She also received her Master of Business Administration at The Wharton School of the University of Pennsylvania.

The cyber insurance market is undergoing a significant shift. While cyber threats continue to evolve, insurance rates have been in a downward trend, and competition among insurers has intensified. This transition is certainly creating opportunities for businesses seeking cyber coverage, sometimes for the very first time. However, it also raises questions about the sustainability of pricing and the long-term outlook of the cyber insurance market.

Despite continued cyber threats, several factors are contributing to lower premiums. Many insurers are now offering cyber policies, increasing market capacity and leading to more competitive pricing. Established players are expanding their offerings, and new entrants are looking to capture market share through very competitive pricing.

We’ve all learned a lot

Businesses have become more proactive in managing cyber risks and that’s certainly good news. Investments in cybersecurity infrastructure, employee training, and compliance frameworks have led to lower claim frequency and severity, which insurers are factoring into their pricing models.

Insurers have refined their underwriting models, using more sophisticated risk assessments. Companies with strong cybersecurity postures are rewarded with better rates, creating an incentive for businesses to invest in security measures.

While ransomware attacks remain a significant concern, some insurers are seeing fewer large-scale claims. Law enforcement efforts, better backup solutions, and increased awareness of cybercrime schemes, like phishing tactics, have helped reduce losses in some cases.

Death by a thousand paper cuts

Yet, the cyber-attacks still keep coming.

The increasing frequency and severity of cyberattacks—ransomware, data breaches, and business email compromise—have forced insurers to reassess their risk models. However, it is not just the high-profile incidents that pose a risk; rather, it’s the multitude of smaller events—such as minor data breaches or phishing attempts—that can accumulate, leading to significant cumulative losses. It calls to mind the idiom: “Death by a thousand paper cuts.”

Each incident may seem manageable in isolation, but together they can overwhelm a business’s defenses and create a ripple effect of claims that insurers must address.

We’ve lived through some very high-profile incidents in just the past year. None proved to be a market-changing event or something we might call a “cyber hurricane.” Past hurricanes like Andrew and Katrina sparked some big changes in the property insurance market.

In the cyber market, we’ve seen what’s been referred to as “Kitty Cats.” While each individual incident has been significant, they have been manageable for most. Collectively though, they have the potential to lead to substantial negative consequences for cyber insurers and their long-term market commitment, especially as we see more and more of these incidents.

Managing through the market cycle

The current trends in the cyber insurance market share several similarities with historical patterns observed in other market segments, like property & casualty. Historically, both market segments have seen their fair share of hard and soft market conditions.

In terms of pricing dynamics, the casualty market adjusts premiums reactively based on claims experience, where a rise in litigation or severe claims prompts insurers to raise prices.

In the cyber insurance sector, premiums surged significantly between 2020 and 2022 in response to escalating ransomware attacks and data breaches, but the current trend indicates a decline in rates due to increased market capacity and competitive pressures. This rapid pricing adjustment reflects a more volatile environment even compared to the casualty market’s historical patterns.

When examining claims frequency and severity, the casualty market has dealt with predictable claims patterns based on historical data, while the cyber insurance sector is dealing with both rapidly evolving frequency and severity of claims. As the casualty market has adapted to new types of risks, such as distracted driving and changes in workplace safety regulations, the cyber insurance market is similarly influenced by regulatory changes, particularly those concerning data protection and privacy.

While the cyber insurance market reflects dynamics that echo those of the historical casualty insurance market, the unique and rapidly evolving nature of cyber risk presents distinct challenges that require the insurance industry to remain agile and responsive, but also to pay close attention to underwriting discipline and the aggregation of cyber risks.

Insurers can and often do exit markets under challenging conditions, such as high loss ratios, increased competition, and evolving regulatory pressures. By maintaining underwriting discipline and closely watching risk aggregation, cyber insurers can better manage their exposure, ensure sustainable operations, and most importantly, provide reliable coverage for their clients, for the long term.

What businesses should do now

With the current competitive market, businesses have an ample opportunity to secure affordable cyber insurance coverage. However, to assure that they are getting the right cyber coverage and are well prepared for price fluctuations, they should take a strategic approach:

Compare multiple providers: In a competitive market, businesses should compare quotes from various insurers to secure the best mix of price, coverage, underwriting, and claims experience. Longevity in the cyber market is crucial, as cheaper options may lack the financial stability to pay future claims. Additionally, prioritize claims-paying experience; established carriers handle complex claims efficiently for quicker payouts. In large insurance towers, more experienced lower-tier carriers facilitate faster claims processes, while less experienced layers can complicate and delay them.
Continue to invest in cybersecurity: Maintaining strong security measures can help businesses qualify for lower premiums and broader coverage, particularly in mitigating the risk of smaller cumulative incidents.
Understand policy terms: Companies should carefully review coverage limits, exclusions, and response services to avoid gaps in protection.
Take advantage of your insurer’s proactive cyber security services: To help clients actively manage cyber exposures, many insurance markets, AXA XL included, offer proactive cyber risk management services including risk assessments, threat intelligence, vulnerability management, and security awareness training to identify and mitigate potential cyber threats before they escalate.
Work with your broker: An experienced broker can help navigate the evolving market and find policies tailored to specific needs. Brokers can also provide valuable insights into policy terms, help businesses understand exclusions, and assist in claims processes.

It’s a pivotal moment

The cyber insurance market is at a pivotal moment. If loss ratios remain stable and underwriting remains disciplined, rates could continue to be competitive, fostering an environment where businesses feel empowered to secure comprehensive coverage. However, as we observe market cycles, it’s essential to recognize that economic conditions can affect risk perception and pricing structures.

Insurers are watching the potential impact of cumulative claims that can arise from seemingly minor cyber incidents. If cyberattacks escalate in severity and frequency—particularly through the accumulation of minor incidents—insurers may have to adjust pricing again.

Ultimately, businesses should not only focus on capitalizing on current market conditions but also prepare for potential fluctuations. By investing in risk management strategies and fostering a culture of cybersecurity awareness, organizations can better position themselves to navigate the complexities of the cyber insurance market as it responds to changing economic and risk environments. &

New Jersey Workers’ Compensation Medical Cost Trends in 2024. How to Improve the Trend

Tips for managing costs and outcomes in a state where expenses can track above the national average.

In 2024, New Jersey’s workers’ compensation system has been influenced by several key medical trends, including rising medical costs, legislative changes, and evolving treatment protocols. Understanding these developments is crucial for stakeholders navigating the state’s workers’ compensation landscape. Below are just some of the key trends to follow:

Rising Medical Costs

HCS identifies providers with WC and PIP experience and contracts with the services most needed by the injured individual. HCS is contracted with nearly all hospitals and all level 1 and level 2 trauma centers in the State of New Jersey. We identify initial treaters, specialists, physical therapy centers, ambulatory surgical centers, urgent care providers, diagnostic centers and more. Using a proprietary formula, the best providers are highlighted so that clients can rest assured their injured claimants are in the right hands.

Rising medical costs are significantly impacting workers’ compensation systems, with New Jersey (NJ) experiencing notable challenges. Key factors contributing to this trend include:

Absence of a Medical Fee Schedule: Unlike many states, NJ lacks a standardized medical fee schedule for workers’ compensation. Instead, it relies on a “usual and customary” charge system, leading to higher medical expenses. This absence has resulted in NJ having some of the highest workers’ compensation premiums nationwide.
Medical Inflation: Nationally, medical care costs have outpaced general inflation. This trend is driven by increased consumption of medical services, labor shortages, and higher wages for healthcare workers, all of which elevate the costs of services covered by workers’ compensation.
Surgical Costs: NJ reports some of the highest surgical costs in the U.S., averaging 115% more than other states. This is attributed to the lack of fee schedules and the prevalence of out-of-network providers receiving higher payments for services.
Medical Claim Petitions: The practice of medical providers accepting payments and subsequently filing petitions for additional compensation has led to increased payouts and administrative burdens, further driving up costs.

These factors collectively contribute to the rising medical costs in NJ’s workers’ compensation system, posing challenges for employers, insurers, and policymakers in managing and mitigating these expenses.

Legislative Changes

Recent legislative changes in NJ have increased workers’ compensation costs for employers/insurers.

In August of 2024, legislation was enacted to raise the attorney fee cap in workers’ compensation cases from 20% to 25%. This adjustment acknowledges the increased workload of workers’ compensation attorneys since the cap’s establishment in 1927.

NJ’s Division of Workers’ Compensation typically requires employers/insurers to cover 60% of the injured workers’ attorney fees, with the employee responsible for the remaining 40%. With the new 25% cap, employers/insurers costs have risen.

Also, in response to escalating medical costs, NJ has implemented legislative measures aimed at regulating expenses within the workers’ compensation system.

Notably, the state increased the maximum allowable fee for evaluating physicians from $600 to $1,000. This adjustment seeks to ensure that medical experts are fairly compensated for their evaluations, potentially improving the quality of medical assessments in workers’ compensation cases.

Evolving Treatment Protocols

Dave Cucinotta, Director of Finance Strategy and Administration, Horizon Casualty Services, Inc.

The integration of advanced medical treatments and technologies has also influenced workers’ compensation medical trends in the Garden State.

“While these innovations can enhance patient outcomes, they often come with higher costs. The challenge lies in balancing the adoption of these advanced treatments with the need to manage expenses effectively,” said Dave Cucinotta, Director of Finance Strategy and Administration for Horizon Casualty Services, Inc.

The increasing prevalence of workplace-related mental injuries has prompted discussions about compensability and appropriate treatment protocols. Addressing mental health issues requires comprehensive approaches, including counseling and therapy, which can contribute to higher overall medical costs.

Comparative Analysis with Other States

When compared to other states, NJ’s workers’ compensation medical costs are higher than average. Studies by the Workers Compensation Research Institute (WCRI) indicate that medical payments per claim in NJ are notably higher, than in other states.

This comparison highlights the need for continued evaluation of cost-containment strategies to align NJ’s expenses with national benchmarks.

Impact on Stakeholders

The rising medical costs within NJ’s workers’ compensation system have significant implications for various stakeholders:

Employers: Increased medical expenses will lead to higher insurance premiums, affecting business operating costs.
Employees: While access to advanced medical treatment is beneficial, there is a concern that escalating costs could influence the approval and provision of necessary care.
Insurers: Insurance carriers may face challenges in underwriting policies and managing claims effectively considering rising medical costs.

Future Considerations

To address these challenges, stakeholders might consider the following strategies:

Promoting Preventive Care: Encouraging workplace safety and preventive health measures can reduce the incidence of injuries, thereby decreasing overall medical expenses.
Enhancing Loss Control Services: Evaluating workplaces with the intention of preventing injuries before they happen is worth the investment.
Enhancing Case Management: Improving coordination of care and case management can ensure that injured workers receive appropriate and timely treatment, potentially reducing prolonged medical costs.

How to Improve the Trend

With NJ’s workers’ compensation facing significant challenges due to rising medical costs, legislative changes, and evolving treatment protocols, there is a need for improvement.

Addressing these issues requires a collaborative approach among policymakers, employers, insurers, and healthcare providers to ensure that the system remains sustainable and continues to serve the needs of injured workers effectively.

“The most significant way to improve medical cost trends in NJ workers’ compensation is to evaluate who is pricing the claims,” said Cucinotta.

Horizon Casualty Services, Inc. (HCS) has been providing PPO network services to NJ clients since 1994

HCS plays a pivotal role in improving medical cost trends through its extensive provider network and innovative, data-driven strategies to achieve superior medical outcomes at the lowest cost. Through its Outcomes Focused Network Strategy, HCS ensures that injured workers receive care from top-tier providers who prioritize quality, adhere to evidence-based practices, and take a conservative approach to costly interventions like surgery and prescriptions. By contracting with a broad network of premier providers and securing highly competitive rates, HCS significantly reduces costs while maintaining exceptional care standards. Additionally, through proactive dispute management, precise data integrity, and an extensive network, HCS ensures a seamless, efficient process that significantly reduces administrative costs.

Cucinotta adds that, “These innovative approaches positions HCS as a leader in controlling medical costs and driving positive results in the NJ workers’ compensation landscape.”

For More Information

For more information, email Jed Hoban, HCS Business Development Executive, at Jed_Hoban@HorizonBlue.com or visit or visit https://www.horizonblue.com/horizoncasualty/.

About Horizon Casualty Services, Inc.

HCS, in business since 1994, is a leading PPO in New Jersey WC and PIP. HCS has a 100% direct-contracted provider network that includes almost all New Jersey acute care hospitals. The network delivers significant overall savings and, with its deep focus on precision, an extremely low appeals rate. Its PPO results, combined with its Healthcare Value Strategy and Outcomes Focused Network, enable insurers to be the best at delivering quality medical care to claimants at the right cost — clearly a win-win for all. HCS is an independent licensee of the Blue Cross and Blue Shield Association.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Horizon Casualty Services, Inc. The editorial staff of Risk & Insurance had no role in its preparation.

Horizon Casualty Services Inc., an affiliate of Horizon Blue Cross Blue Shield of New Jersey, in business since 1994, is a leading PPO in New Jersey workers' compensation and personal injury protection. The company's 100% direct-contracted provider network includes almost all New Jersey acute care hospitals, significant overall WC savings and, with its deep focus on precision, an extremely low WC appeals rate of 0.2%. Its PPO results, combined with its WC healthcare value and OFN strategy, enables insurers to be the best at delivering quality medical care to claimants at the right cost — clearly a win-win for all.