Cyber Risk Increase for Law Firms

Over the past 20 months, law firms have become a top 5 industry target for cyber actors/criminals, right behind financial institutions, healthcare, and educational organizations.

The sustained onslaught of cyber-attacks including ransomware, email compromises, and social engineering have dramatically driven up claims and incident costs and have either forced many insurers to raise rates, reduce capacity and in many cases, pulling out of providing cyber insurance for law firms.

According to one carrier that specializes in cyber coverage for law firms, the increase in the type of cyber claims has been as follows:

  1. Ransomware – The number of ransomware infections increased by 207% and the number of ransomware infections resulting in data exfiltration increased by 396%
  2. Social Engineering – The number of social engineering incidents increased by 153%
  3. Business Email Compromise – The number of compromises increased by 46%
  4. Data Breach – The number of breaches (non-ransomware related) increased by 41%

These increases are significant and highlight the risk that law firms face from a cyber claim. If you are interested in a quote to protect your firm from a cyber risk, contact Kaestner & Berry.

The “Step Rate” Increase

Lawyers buying malpractice insurance for the first time are surprised when their premium goes up year over year when nothing seems to change. This increase is on account of a standard insurance industry practice known as a Step Rate.

What is a Step-Rate increase?

The first year your firm has a professional liability policy, your coverage only includes the current year of legal work. As a result, the underwriter actually provides a discount. After the first year renewal, your premium will increase as the policy covers an additional year of legal work. The increase is a result of the underwriter gradually reducing the discount.

How long does Step-Rating last?

Step rating typically ends in 5-7 years depending on various factors, including the state in which you are located. You cannot avoid the impact of step rating by switching carriers as almost all carriers use step rating.

What else is making my rates change?

Changes in limits, deductible, areas of practice, number of attorneys, claims, changes in firm procedures as well as a carrier’s change in underwriting guidelines could impact your premium.