How Insurers Are Reinventing Cyber Insurance for the Tech-Driven Marketplace

As digital transformation accelerates across retail, the intersection of cybersecurity and insurance has become mission-critical. From enterprise-wide strategies to AI-driven automation, today’s retailers face an evolving threat landscape, and forward-thinking insurers are stepping up to help businesses mitigate risks while navigating the complexities of a hyperconnected world.

Safety National’s National Director of Cyber & Technology Underwriting, Spencer Timmel, shares how the insurance industry is evolving to meet modern retailers’ unique cybersecurity challenges and what risk leaders should prioritize in this rapidly shifting environment.

From Disruption to Digital Acceleration

The COVID-19 pandemic forced businesses across all industries to shift rapidly to remote work and online operations. For the retail sector, this meant massive investments in e-commerce, distribution infrastructure, and customer engagement platforms. But while digital adoption surged, cybersecurity often lagged behind.

Threat actors exploited the speed of change. Infrastructure was quickly deployed, but security and employee training could not keep up. The result: ransomware attacks spiked more than 50% in 2020 and more than doubled in 2021, leading to a surge in cyber insurance claims and unprecedented market instability.

To respond, insurers were forced to restrict coverage, reduce policy limits, and impose substantial rate increases, adding further strain to already overextended businesses.

A Stabilizing Cyber Insurance Market

By 2023, ransomware activity had become more manageable as organizations improved their data backup systems and incident response capabilities. Many could now recover from attacks without paying ransoms. In response, cybercriminals raised the stakes, targeting less prepared organizations with increased severity.

As digital operations matured, the cyber insurance market stabilized. Capacity has returned, coverage has expanded, and premiums are down. However, the focus has shifted to data privacy claims, often triggered by improper handling or collection of customer data. These issues, now a key concern in retail, frequently lead to long, costly regulatory and legal battles.

Raising the Security Bar

During the insurance hard market of 2021- 2022, businesses were pushed to elevate their cybersecurity standards to qualify for coverage. Multi-factor authentication (MFA), endpoint detection and response (EDR), and demonstrable incident recovery plans became non-negotiables.

Coverage restrictions, while challenging, forced a global upgrade in cybersecurity. Today, many retailers are focused on optimizing the most recent security investments rather than continually chasing the next shiny new tool. They are ensuring cybersecurity resources are fully deployed across their entire environment, providing more visibility and quicker response times.

However, large digital environments still present significant risks. The more endpoints you manage (point-of-sale systems, mobile apps, third-party integrations), the greater the chance something gets overlooked. This complexity makes comprehensive cyber assessments and individualized underwriting more critical than ever.

AI: A Double-Edged Sword for Retail Risk

New cybersecurity concerns emerge as retailers embrace AI for personalized shopping, inventory optimization, and fraud detection. When employees or IT teams interact with open AI models, there is a significant risk of leaking or misusing data.

Organizations must implement clear guidelines around AI usage: define what data can be used, train employees on proper protocols, and ensure any AI platform integrations are governed by closed, contractual systems.

Embedding ethical frameworks into AI policies is essential. Retailers that can explain their safeguards and governance to underwriters position themselves to potentially receive more favorable insurance terms.

Risk Control in Action: Practical Support for Retailers

For insurance carriers, it should not just be about policies, but also prevention. Insured clients need external scans to detect vulnerabilities like exposed ports or outdated systems, which are often exploited by cybercriminals. This level of proactive engagement helps businesses fix problems before they become breaches.

For smaller retail operations that may not have large in-house cybersecurity teams, tools, training resources, and vendor connections can help make cybersecurity support more accessible. This approach reflects a shift in focus. Instead of just insuring risk, insurance providers can help retailers actively reduce it.

AI in Claims Processing: Balancing Efficiency with Oversight

In an age of intelligent automation, carriers are leveraging AI to streamline internal claims processes, but with clear boundaries. AI should be used as a supplementary tool, and never to make decisions. All underwriting and claims judgments should be made by in-house employees, ensuring accuracy, transparency, and accountability. For retailers facing a breach, that direct connection and expertise can make all the difference in speed, communication, and recovery.

Navigating Compliance and Legal Landmines

One of the most pressing threats for retailers today is not just external hackers, but data privacy class action lawsuits alleging improper collection, use, and disclosure of customer data. Plaintiff attorneys are actively scanning retail websites and digital tools for potential violations, from pixel tracking to improper data disclosures.

With regulations constantly evolving across states and countries, the key to compliance is maintaining strong data privacy fundamentals. This means knowing what data your organization collects, how it is used, and how it is protected.

Retail’s New Reality Requires Smarter Risk Management

Retail technology is no longer an optional investment; it is the lifeblood of modern commerce. But with innovation comes exposure, and the risks facing today’s retailers, from ransomware to regulatory lawsuits, require more than basic insurance coverage.

Insurers can be true strategic allies, helping businesses not only recover from cyber incidents but prevent them altogether. For retailers aiming to scale securely in 2025 and beyond, risk management must be as sophisticated and forward-looking as the technology it protects.