2024 Cyber Risk Index shows coverage confidence increase, even as startups fear AI’s shadow

As cyberattacks continue to dominate headlines and wreak havoc on businesses of all sizes, VC-backed startup founders are turning to cyber coverage as a crucial layer of protection. Cyber insurance adoption is climbing as startups learn to navigate the ever-evolving minefield of modern risks and challenges.

For our third annual Cyber Risk Index report, Embroker surveyed more than 500 VC-backed startup founders to shed light on how their perception of cyber risk is shifting in real time. As startups face growing concerns around AI, Internet of Things (IoT) devices, and biometric authentication systems, they are doubling down on cyber protections. Despite the rising tide of concerns, founders remain optimistic, putting their faith in a combination of robust insurance policies, top-notch cybersecurity vendors, and strong internal teams. 

Cyber coverage — not just a safety net anymore

This year’s survey reveals that cyber insurance is no longer a “break glass in case of emergency” tool — startups are leveraging it as part of their growth strategy. The adoption of cyber insurance hit an all-time high, with 93% of startups covered, up from 90% in 2023 and 86% in 2022. 

So, why are founders flocking to cyber coverage? Sure, it’s about risk mitigation (cyber threats are only getting more and more complex). But, here’s the twist: 

• 40% say cyber insurance has smoothed their path to funding.
• 41% use it as a springboard for additional services, like post-attack response support.
• 41% note it satisfies customer and vendor demands.

For startups, cyber insurance isn’t just about survival — it’s become a critical lever for growth and credibility. 

Coverage confidence is up (thankfully), while attacks increase 

Cyberattacks are every founder’s worst nightmare as they threaten the very foundation of their business. And the numbers don’t lie — 81% of founders surveyed have faced a cyberattack in their careers, up from 78% in 2023 and 67% in 2022.

While these statistics aren’t exactly reassuring, here’s the silver lining: Founders’ faith in their insurance policies is surging as well. Up from 87% last year, 93% of founders now believe their insurance would at least partially protect them in a breach. 

And when it comes to cyber coverage in 2024, simplicity is the name of the game: 

• 48% of founders opted to add cyber to their existing insurance packages, a jump from just 22% in 2023. 
• Only 7% of startups chose the most comprehensive cyber coverage in 2024, down dramatically from 27% last year.

In the coming year, we expect startups to continue mastering the art of balance — keeping equal parts focus on simplicity and strength in their cyber protections to stay resilient in an ever-changing environment.

Malicious AI: Living rent-free in founders’ heads 

Founders are anxious about malicious AI, and honestly, who can blame them?  

• 90% report fears over AI’s potential harm, consistent with last year’s findings. 
• 75% worry about AI-generated deepfakes or disinformation campaigns damaging their company’s reputation. 

Unfortunately, these concerns are anything but far-fetched. From fake election ads to viral disinformation, AI’s disruptive power has been on full display.

The good news? Despite high anxiety, founders’ confidence in their ability to handle AI threats is growing — if their company was subjected to malicious AI today, 82% feel they can successfully combat or recover from it, compared to 76% last year. Additionally, 81% say they’re conducting risk assessments to identify potential cyber threats posed by AI, another indicator that they are taking proactive measures to mitigate their vulnerabilities. 

While the pros and cons of AI remain hotly debated, founders are standing firm, largely trusting their cyber protections to back them up. 

Startups are constantly tweaking their playbook for cyber risk, most recently pairing bold strategies with simpler coverage. Whether battling emerging threats or navigating the next AI-induced headache, they’re investing in the tools and protections that matter most. 

Want to dive deeper into the evolving cyber landscape? Get our full report here.

Also, check out the press release, including quotes from our CEO, Ben Jennings, and CIO, Andy Lea.