What is cyber insurance and why you need it
Let me start by being clear that Cyber insurance is not a mechanism to protect your organization from Cyber-crime. Instead, it is a safety secondary net that can help keep your business on stable financial footing in the event a cyber security breach event occurs. In today’s topic of “what is cyber insurance and why you need it”, we will explore more about cyber insurance, what it covers and why you need it.
Technology Exposed To Cyber Attacks
In modern business world, using technology to facilitate business and its processes is common. You could be using internet to showcase your products and services, you could be doing some e-commerce business online or simply you could be using the emails to send and received business communications and quotations. In some form, technology has already infiltrated your business process.
As much technology is a great tool, it also can act as a double-edged sword when you least expect. They are best gateways to cyber attacks from many sources. Hackers, criminals, insiders or even nation states, love the vulnerabilities in your electronica technology systems to launch cyber attacks. As you already know, cyber attacks can cause moderate to severe losses in some monetary forms to any organization of any size. As a business owner, which risks are you ready to avoid, accept, control or transfer? When you know there is important function that is exposed to risks that you cannot accept or control, then it is better you transfer it. Cyber insurance is a solution when you decide to transfer some of these risks and we will explore in greater details in the following passages.
What is cyber insurance?
A cyber insurance policy comes in many names. Cyber Insurance Policy can also be called as cyber risk insurance or cyber liability insurance coverage (CLIC). Cyber Insurance is tailored and designed in a way that helps an organization mitigate risk exposure. You will be able to transfer the costs involved with recovery after a cyber-related security breach or similar event. You could be hearing the word “cyber insurance” only today, but it is not new in the market. In fact, cyber insurance began catching on in 2005. Cyber insurance is expected to fetch a total premium of around 7.5 billion by the end of year 2020. The good news is , according to PwC, about 1/3 of U.S. companies currently purchase some type of cyber insurance.
What does cyber insurance policy covers?
The large number of client base for this type of insurance policy should by now tell you that it is one of the most important business insurance policy in current time. Buy what does Cyber Insurance policy covers?
The cyber insurance policy coverage explained
Broadly speaking, most cyber insurance policies are designed to covers expenses related to first parties and by third parties claims. Now let’s look at some of the standard coverages that a cyber insurance policy provides for your business:
- Investigation:When a cyber break takes place, do not expect cyber insurance policy to stand at the door to pay you a lump sum of money. For a payout, an investigation by approved investigator is necessary. This investigation allows us to understand what occurred and how it happened. The investigation will also examine how repair damage and how to prevent a re-occurrence of similar event in the future. Generally, your local police force may be involved in such investigations and even a third-party security firm can be engaged. All these takes time and money!
- Business losses:A cyber insurance policy may hold components of errors & omissions policy that covers errors due to negligence and other reasons. Cyber insurance policy holds covers for monetary losses experienced by network downtime. It also overs business interruption cost, data loss recovery cost and costs involved in managing a crisis. Most importantly, It also covers costs involved repairing reputation damage.
- Privacy and notification:When a cyber-attack takes place, you are required to broadcast data breach notifications to customers and other affected parties. This process is mandated by many law enforcing agencies around the world. You are expected by law to provide credit monitoring for customers whose information was or may have been breached. In order to meet expectation of these legal bodies, you need to spend money to execute the necessary requirements and simply means, it involves additional costs.
- Lawsuits and extortion:You should also be ready to face lawsuits that involves legal expenses and most expense involved in legal settlements and regulatory fines. If you are unlucky, you could also be exposed to cyber extortion, such as from ransomware. Who is going to pay for all these costs? A good cyber insurance of course!
The cyber insurance policy premiums
Understand that the Insurance premiums are calculated based on probability of risk occurrence. Since most organizations do not report the full extent of their cyber-attack due to loss of brand and company image. The types and forms of cyber-attacks too keep changing very frequently. Companies do not also share the full extent of their business IT infrastructure security set up with the insurers. The lack of proper information means Insurers are exposed to “mystery risks”. That is why, this policy does not come cheap. The good news is, with more information and regulatory implementations, the insurance premiums are going down.
Cyber Insurance Buyer’s Guide
So, as a buyer, what do you need to look out for when you purchase your Cyber Insurance for your business? What are the factors you need to look out for when you buy a cyber insurance? read our second part of this article found here (Cyber Insurance Buyer’s Guide).