Cyber insurance is a relatively new form of insurance as opposed to its Life and Health variants. Other novel types could include Engineering Insurance and Device Insurance.
With the alarming rate of cyber attacks and threats, cyber insurance is becoming more prominent as a measure to cover the loss and damages of cyber intrusions.
The gravity of cyber threats poses a dilemma to our data wellbeing. According to the IBM Ponemon Institute 2019 data breach report (via Forbes), it took, on average, over nine months to discover and remediate a data breach.
What is Cyber Insurance or Cyber Liability Insurance?
Cyber Insurance is an insurance policy that covers financial losses resulting from data breaches and other cyber events.
In our data-riddled society, cyber insurance is vital. Practically everything we do is data-centric. Customer records and details? Website analytics? Market research and reality? Data, they say, is the new oil.
When these data are infringed upon, cyber insurance is a safety net that can help recover the costs. Crafty hackers with innovative schemes are on top of their game. Irrespective of the defensive strategies we put in place, it is better to be safe than sorry if there’s an unpreventable breach.
Do You Really Need Cyber Insurance?
Do you find yourself asking whether or not you need insurance? It’s quite simple. Do you rely on technology to do business? Do you manage and store company data or customer details? Let’s streamline its importance: Do you use computers to send, receive or store electronic data?
You would need some level of coverage if you answered “Yes” to the questions above. Have you ever thought of what happens when you lose the data? Or if a hacker steals or damages the data? It could be costly to replace or restore.
There may also be sensitive data in your computer that belongs to a third party such as customers, employees or vendors. If a hacker compromises data, the owners might sue your company for damages. You can protect your company against all costs associated with data breaches by purchasing a cyber liability policy.
Companies of all sizes should secure cyber insurance. It is erroneous to think that small-sized companies do not need coverage. In reality, they stand a higher susceptibility to risks because they do not spend as much on cybersecurity as larger companies.
Cybercriminals do not necessarily target a company based on size or name. Here’s how it works: They may use bots to scan the internet and search for companies with security gaps. Research shows that hackers are looking for businesses of any size with valuable customer data they can steal and sell on the black market.
Also, people wrongly assume that security systems are a substitute for cyber insurance. New viruses and infiltrations can breach security solutions.
Cyber insurance, therefore, provides coverage that can include data theft or loss, network intrusions, information-security breaches, and lost income due to system downtime. Also, read more about comprehensive insurance.
Who is Cyber Insurance for?
Cyber insurance or cyber liability insurance coverage (CLIC) is mainly for organizations. This type of insurance helps organizations to pay off some of the costs related to cyber security in case of a breach. Every organization can benefit from this especially if they lack the resources to offset the cost of a security incident.
Why is Cyber Insurance necessary?
Experts at IBM estimated the cost of a data breach at USD 4.24million. However, not all companies will be able to pay off this cost. This is why having Cyber Insurance is necessary. It will take care of the financial cost of a data breach. Additionally, it allows you to focus more on how to your recovery strategy after a security attack.
What does cyber insurance cover?
Whatever your cyber insurance covers will depend on the type of policy you purchase. However, most cyber insurance covers some basic costs. They include:
1. Cost associated with Cyber security breaches
Several cases lead to the compromise of an organization’s cyber security. In situations like this, the affected organization will have to pay the ransom for being vulnerable. Additionally, some cyber security attacks may bring down a company’s server. Under such circumstances, the company will have to pay for the resulting damage incurred while their server is down. Cyber risk insurance takes care of this cost.
2. Cost related to legal fines and settlements
Every security breach often requires a company to pay legal fees. These fees are associated with investigation, lawsuits as well as settlement. Cyber insurance coverage covers the cost of all legal fees.
3. Cost associated with response and recovery
Every security breach requires a response and recovery. Also, some companies may decide to invite a third party. This third party will figure out what type of data was breached, how to recover and prevent a future occurrence. Your cyber insurance will cover the cost of employing a third-party investigator.
4. Cost related to communication
A breach will require a company to set up a communication strategy for their employees, customers, or the media. If the attack is severe, they may have to set up support and call centers. Cyber insurance will cover these costs.
All these sums up the cost that most cyber insurance policies covers. Although, some may cover more costs depending on the policy type you choose.
What cyber insurance does not cover
Here are some costs most cyber insurance policies don’t cover
1. Cost related to intellectual property theft
2. Cost related to potential future lost profit due to the long-term effects of an incident or Advanced Persistent Threat (APT)
3. Cost incurred because of the organization upgrading its system and security after the incident.
Most policies do not cover this cost so it is better you prepare for them beforehand.
What are the questions to ask when buying cyber insurance?
Before you buy cyber insurance, ensure that it covers some important costs. Here are four questions to ask before buying cyber insurance:
1. Does the cyber insurance policy cover third-party incidents?
Some cyber insurance does not cover costs related to incidents from third-party breaches. However, you need your cyber insurance to cover this aspect because a third party may be the cause of some incidents.
2. Does cyber insurance take care of social engineering attacks?
Although social engineering is a very common cyber security attack, some policies do not cover it. Since every organization is prone to this attack, you must ensure that your cyber insurance covers it.
3. Will it cover costs associated with reputational damages?
Most high-profile organizations suffer reputational damage when there is a cyber-security breach. This damage may affect their yearly revenue and that can be disastrous for their finances. Therefore, it is important for any cyber insurance you choose to cover this cost.
4. Will it cover Advanced Persistent Threats (APT)?
Basically, APT are attackers that reside within a company’s network. They lurk within to either exfiltrate data or wait for a vulnerable moment to strike. Some cyber insurance does not cover the cost of APT. This is because of the long duration between the cyber security incident and the detection of APT.
What are the factors affecting the cost of cyber insurance?
The cost of your cyber insurance depends on the following:
1. Type of industry
2. Size of Industry
3. Type of coverage
4. Lastly, your company’s footprint
What are the types of Cyber Insurance?
1. First-Party Cyber Insurance Coverage
These apply to expenses your firm directly incurs as a result of the breach. For instance, this could include the cost of informing your client about a hacker attack. Coverages here include Loss or Damage to Electronic Data, Loss of Income and Extra Expenses, Cyber Extortion, and others.
2. Third-Party Cyber Insurance Coverage
These apply to claims against your company by individuals that have been injured as a result of your actions. For instance, a client sues you for negligence after a hacker steals his data from your computer system and leaks it. Coverage here typically applies to damages or settlements that result from covered claims as well as the cost of your defense.
Conclusion
Having a cyber-insurance is a necessity for any organization that lacks the resources to cover cyber security breaches. Every organization will face at least one security breach so it is important for them to prepare beforehand. Therefore, ensure that your company has cyber insurance to save guard your assets by reducing the cost associated with security breaches.
Need a loan? Kindly check out this platform that allows you to compare loans from several lenders in minutes. This would help you make the best decision for you.