• 10 months ago
Fintech startups Coalition and At-Bay, founded by security and spy-agency veterans, are using their tech smarts to transform the fast-growing business of protecting companies against hackers. Forbes Senior Editor Jeff Kauflin sat down with Brittany Lewis to explain more about this new aspect of cybersecurity.

0:00 Introduction
0:21 Reinventing Cybersecurity
1:35 Recent Rise In Spyware Attacks
4:46 What Is The Price Of Cybersecurity For Business Owners?
5:44 The Price Of Cyber Insurance
8:05 Cyber Threats Are Not Going Awaya

Read the full story on Forbes: https://www.forbes.com/sites/jeffkauflin/2024/02/12/how-two-former-spies-cracked-the-11-billion-cyber-insurance-market/?sh=5b4e07086cc9

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Transcript
00:00 Hi everybody, I'm Brittany Lewis with Forbes Breaking News.
00:05 Joining me now is my colleague, Forbes Senior Editor Jeff Kaufman.
00:09 Jeff, thanks so much for coming in.
00:11 Thanks for having me.
00:12 I first want to extend a big congratulations.
00:15 The FinTech 50 list has officially dropped, so I'm sure that's a weight off your shoulders.
00:20 Yep, yep.
00:21 Great to have it done.
00:22 And part of that story, or part of that list rather, you wrote a story about two upstarts
00:26 attempting to transform the cyber insurance industry, and you detail in the story how
00:30 these companies have been quote, "reinventing the way cyber insurance is underwritten and
00:35 managed."
00:36 So first, can you give us an overview of what the story is about?
00:39 Absolutely, yeah.
00:40 So it's about, it's really focusing on these two companies, two fast-growing startups,
00:45 and really the dynamic going on in the overall market is cyber attacks.
00:50 You know, ransomware, business email phishing, where people are tricked into paying for a
00:56 fake invoice for hundreds of thousands of dollars, and this threat is not going away.
01:02 It's hard to manage.
01:03 It's always going to be a risk, and so companies realize they need insurance to protect against
01:07 it, just like you need to protect against fires, theft, floods.
01:13 And so what's happening is more and more companies are paying for cyber insurance, and these
01:19 cyber insurance startups are really using technology to do it in a smarter way, to assess
01:25 risk in a smarter way, and to provide better coverage.
01:28 So Jeff, can you give us the origin story a bit here?
01:32 How did this type of cybersecurity become a viable business need?
01:35 Yeah, I would say just the rise in ransomware attacks has caused more of a need for it,
01:42 and so, you know, I think in the first half of 2023, the average ransomware demand was
01:48 1.6 million, and so that cost has gone up and up and up over time.
01:53 It used to be, you know, in the hundreds of thousands or even lower, but especially during
01:58 the pandemic, it's gotten worse and worse, and so the need for it has just grown.
02:03 And even farther back in history, there's been some things like privacy issues or data
02:09 leaks.
02:10 Target had a big one many years ago, and these have caused, you know, over tens of billions
02:16 -- not tens of billions, but billions of dollars potentially in losses for a lot of these companies.
02:21 So you profiled two cyber insurance companies, Coalition and AppBay.
02:26 Can you talk a little bit about them?
02:28 Sure.
02:29 So they started around 2017, and one of the things they did really differently is they
02:36 used technology in a different way to assess risk.
02:38 So because of the open nature of the internet, you can actually scan companies, their websites,
02:45 their networks, and understand how vulnerable are they to a cyber attack.
02:52 And so what they can do is -- and this technology has become more widely available -- they can
02:57 do this scanning.
02:58 It's almost like going to someone's house and checking their locks and their security
03:01 system and seeing, okay, this company has poor security controls.
03:07 They have kind of a messy network with a bunch of holes in it, and so then they can price
03:12 the insurance higher.
03:14 And so they were among the first companies that started using technology to better assess
03:18 risk, and then they can price it more appropriately and figure out how much coverage they can
03:24 offer at what price.
03:26 Something when I was reading your profile I noticed is that the Coalition CEO and co-founder
03:30 is a former CIA analyst, and the AppBay CEO and co-founder is a veteran of one of Israel's
03:37 military cyber intelligence units.
03:39 So is this common, or is this just a coincidence for, in this space, to be formally government-trained
03:44 either through intelligence agencies or the military?
03:48 Yeah.
03:49 It is, I believe, it's a coincidence.
03:51 I think that it's really surprising that two of the leading companies are both former,
03:59 you know, essentially CIA or CIA equivalent within the case of AppBay.
04:05 And so, yeah, I think it's a coincidence.
04:08 A lot of the other companies you see, some of the other companies you see, they were
04:11 security entrepreneurs or tech entrepreneurs, or they were in insurance, you know, insurance
04:19 executives.
04:20 And so I think it's just kind of a funny coincidence, but it has made them better able to assess
04:26 risk, I would say, because they can kind of think like hackers.
04:29 You know, AppBay and Coalition's founders, they essentially were studying hackers in
04:34 the CIA and in the Israeli military intelligence.
04:37 And so they learned how to think like hackers, and I think that helped them to really develop
04:43 the technology that would assess risk better.
04:47 One of the CEOs that you mentioned in your profile said something to you to the effect
04:51 of if your business has a computer and the internet, you need cybersecurity.
04:55 So obviously, I want to talk about money here, because if you need cybersecurity, that's
05:00 probably coming at a price.
05:02 What is that price?
05:03 Yeah, and it ranges.
05:05 There's a wide range.
05:06 These companies, AppBay and Coalition, really serve the smaller and mid-sized businesses.
05:12 On average for them, Coalition tells me that it costs about $3,000 a year for the premiums.
05:19 But as the companies go bigger, it can cost a lot more.
05:22 So if you're looking to get, let's say, $10 million in coverage, and you have pretty good
05:28 security controls, Coalition says that kind of policy might cost $120,000 a year.
05:34 And if you have poor security controls, the cost only goes up.
05:39 As more competitors flood the zone here, do you see that these costs will come down any
05:44 time soon?
05:45 They have been coming down a little bit.
05:46 So 2023, basically, the price for cyber insurance fell about 20%.
05:52 And it goes up and down, and this happens in all types of insurance, where there is
06:00 limited capacity, and so prices go up, because a lot of insurers become more risk-averse,
06:06 and prices go up, and you can charge a lot more.
06:09 And then more competitors come in, like you said, and capacity widens, and prices come
06:15 down.
06:16 So it kind of always fluctuates.
06:17 But yeah, over the past year, about 20%.
06:20 Prices fell about 20%.
06:21 You mentioned earlier in the conversation numbers that start with an M, million.
06:26 So I want to talk about the flip side here.
06:28 Let's say you're a company, you get hit with a cyber attack, you are not cyber insured,
06:34 what is that going to cost you?
06:35 Yeah, you know, that's a great question.
06:39 It depends on the size of the company, always.
06:42 But let's say-- and one of the things that actually causes some of the biggest losses
06:47 is if your operation totally stopped.
06:50 So there's one example we talk about in the story of a distillery, where they had a hacker
06:56 break in and was able-- essentially shut down their whole operations.
07:02 And so they had a lot of lost revenue.
07:05 And I think the lost revenue was about-- it was a smallish business, but it was about
07:10 $800,000 in lost revenue.
07:13 And then there was a ransomware piece of this, where they had to pay the ransom to get back
07:17 online.
07:18 That was maybe $600,000.
07:19 Anyway, the total cost was about $2 million.
07:22 Luckily for them, they had cyber insurance, and so they didn't have to pay that themselves.
07:29 And they were only paying, I'd say, maybe $20,000 a month in premium.
07:35 So for $20,000 a month, they were able to get a $2 million claim paid.
07:43 In your profile, you also quote a CEO saying, "I've worked in security for a really long
07:48 time.
07:49 This is all I think about.
07:50 But essentially, no one else is really thinking about this."
07:53 So let's look into the future a bit here.
07:56 And based on your reporting, do you think more individuals and companies are going to
08:00 become cyber insured or get services like these for protection online?
08:05 Yeah.
08:06 I think it will keep growing.
08:07 I think that because the cyber threat is not going away, it's only growing, just like financial
08:13 fraud is very similar.
08:15 So I think it will keep growing.
08:17 I think that what everyone worries about is a big catastrophic event.
08:22 That's what they call it in the industry, where you're going to see billions of dollars
08:26 in damage.
08:27 And the scary thing about cyber is it can kind of go viral in a way.
08:33 There's no geographical borders that prevent a given cyber attack from reaching all parts
08:39 of the world.
08:40 It can really spread.
08:42 It can kind of...
08:43 And so if there's a real critical vulnerability, let's say in a piece of software that's used
08:49 every day by people.
08:50 And so I don't think the risk is going away.
08:55 I think it's still not very well understood.
08:58 And people worry that it's just going to get bigger.
09:00 I think people will keep buying cyber insurance.
09:03 It is the fastest growing area of insurance right now by far.
09:06 Jeff Coughlin, a big congrats again on the list.
09:10 Thank you so much for joining me.
09:11 Thanks so much for having me.
09:12 This was fun.
09:12 [END OF TRANSCRIPT]
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