In today’s digital world, keeping your business safe from online dangers is a top priority. Imagine having an invisible shield that protects your business from cyber threats – that’s what is cyber insurance.
- Cyber insurance safeguards businesses from financial losses due to cybercrimes, covering gaps left by standard insurance.
- Defending against data compromise is crucial amidst rising cyber threats to avoid customer loss and financial damage.
- To acquire cyber insurance, assess your cybersecurity, document policies, and connect with insurance providers for a suitable policy.
What Is Cyber Insurance?
Cyber insurance, also known as cybersecurity insurance, helps businesses reduce risks from cybercrimes like cyberattacks and data breaches. It protects against financial losses resulting from online threats to IT infrastructure and data management, areas often not covered by standard insurance.
Similar to insurance for physical risks, cyber insurance covers the financial impact of a cyberattack.
Why Does Cyber Insurance Matter?
Cyber insurance is crucial for all businesses because the risk of cyberattacks on various digital aspects is on the rise – applications, devices, networks, and users are all vulnerable. If data is compromised, lost, or stolen, it can severely harm a business, causing loss of customers, damage to reputation, and financial setbacks.
Furthermore, companies can be held responsible for the damage resulting from the loss or theft of data belonging to others. A cyber insurance policy acts as a safety net, protecting the enterprise from cyber events, including acts of cyber terrorism, and assisting in managing security incidents.
An example of its importance can be seen when hackers breached Sony’s PlayStation Network in 2011, exposing data from 77 million users and disrupting services for 23 days. Sony had to bear costs exceeding $171 million due to this cyberattack, costs that could have been covered if they had cyber insurance. Unfortunately, lacking a policy meant Sony had to manage the entire financial burden resulting from the cyber damage.
Cyber Insurance Working Process
The way cyber insurance operates is much like other insurance types. Various suppliers who offer different business insurances such as errors and omissions insurance, liability insurance, and property insurance sell cyber insurance policies. These policies usually cover both direct losses to the enterprise (first-party coverage) and losses to other enterprises linked in business with the affected organization (third-party coverage).
A cyber insurance policy helps organizations manage financial losses from cyberattacks or data breaches. It also assists in handling the aftermath, covering expenses like investigations, crisis communication, legal services, and customer refunds.
What Cyber Risks Does Insurance Cover?
Cybersecurity insurance usually includes covering losses from data destruction, hacking, data extortion, and data theft. Policies may also pay for legal expenses and related costs. Though coverage specifics can vary, cyber insurance generally includes:
1. Customer notifications
Businesses usually need to inform their customers about a data breach, especially if it involves the loss or theft of personally identifiable information (PII). Cyber insurance often assists in covering the expenses for this.
2. Recovery of personal identities
Cybersecurity insurance aids organizations in restoring the personal identities of affected customers.
3. Data breaches
Instances where personal information is stolen or accessed without proper authorization.
4. Data recovery
A policy for cyber liability insurance generally allows businesses to finance the recovery of data compromised in an attack.
5. Repair of system damage
The expenses involved in fixing computer systems damaged by a cyberattack are also included in a cyber insurance policy.
6. Ransom demands
Ransomware attacks often demand a payment to unlock or retrieve compromised data. Cyber insurance coverage helps organizations meet these extortion costs, although it’s advised against by some government agencies, as paying only incentivizes these criminal acts.
7. Remediation of attacks
A cyber insurance policy assists enterprises in covering legal fees resulting from violating privacy policies or regulations. It also aids in hiring security or computer forensic experts to remediate the attack or recover compromised data.
8. Liability for losses faced by business partners with access to business data.
How much does cyber insurance cost?
How much you pay for cyber insurance every year largely depends on your business size and the industry you operate in. For small businesses, the yearly premiums for cyber insurance usually fall within the range of $1,000 to $7,500. However, these costs are influenced by several key factors we’ll discuss below.
Bigger businesses tend to pay more because they possess a larger digital footprint and handle extensive customer databases. The complexity of their IT systems makes them more susceptible to cyber risks, resulting in higher premiums.
Industries like healthcare, finance, manufacturing, and e-commerce, which deal with substantial sensitive data, often face higher premiums. Cybercriminals target them due to the value of the data they hold; for example, healthcare records are highly sought after in illegal markets.
The amount of coverage you choose directly affects the cost. Just like any insurance, more comprehensive coverage, including protection against data breach costs, business interruption, cyber extortion, and regulatory fines, means higher premiums.
Businesses with robust cybersecurity practices may enjoy lower premiums. Demonstrating a proactive approach to mitigating cyber threats through measures like regular security testing, updated firewalls, antivirus software, and employee cybersecurity training can lead to favorable rates from insurers. Some insurers might even require a minimum level of security for coverage.
Exclusions In Cyber Insurance For Cyber Risks
Cybersecurity insurance commonly excludes certain issues that could prevent or were a result of human errors or negligence:
1. Weak security practices
Cases where an attack happened due to ineffective security processes or poor configuration management within the organization.
2. Past breaches
Breaches or incidents that occurred before the organization obtained an insurance policy.
3. Human mistakes
Cyberattacks caused by errors made by employees of the organization.
4. Insider attacks
Data loss or theft due to an insider attack, implicating an employee as the responsible party for the incident.
5. Existing vulnerabilities
Situations where a data breach occurred because the organization failed to address or fix known vulnerabilities beforehand.
6. Enhancements in technology systems
Expenses related to improving technology systems, including the reinforcement of applications and networks.
What’s Needed To Get Cyber Insurance?
To acquire cyber insurance, start by evaluating your infrastructure and documenting your cybersecurity policies and systems. The cyber insurance company will assess your existing cyber defenses to determine coverage and costs. Without a cybersecurity strategy and infrastructure in place, an organization is vulnerable to data breaches.
Once the cybersecurity infrastructure assesses, proceed to explore policies by reaching out to different insurance providers. Each company has its own policy terms, exceptions, and costs, so carefully review them before committing. The insurance company will evaluate your current cybersecurity strategies to gauge your level of risk and decide on policy issuance.
How To Choose The Right Cyber Insurance Policy
Determining the cost of cyber risk insurance typically relies on a company’s revenue and its industry. To be eligible, a company will usually need to allow an insurer to conduct a security audit or provide pertinent documentation through an approved assessment tool. The findings from this audit will shape the type of insurance policy offered and the associated premiums.
Cyber insurance policies vary among providers, so it’s essential to carefully scrutinize the details to confirm that the required protections and provisions include in the proposed policy. Additionally, the policy should safeguard against both existing and emerging cyber threat vectors and profiles.
Steps To Mitigate Cyber Risk
Addressing cyber risk is crucial for companies of all sizes and across various industries. So, businesses should proactively enhance their cybersecurity and manage risks through a blend of cyber insurance, secure devices, domain expertise, and technology.
- Assess: Begin by evaluating cyber readiness through a reputable professional services organization. This involves conducting a security audit before considering appropriate cyber insurance.
- Implement: The subsequent step is to deploy technology that safeguards the aspects a company plans to insure against cyber threats. For instance, utilizing anti-malware solutions can shield the enterprise from malicious software.
- Insure: The initial two steps demonstrate to insurance providers that the necessary processes and technologies are in place, qualifying the organization for cyber insurance.
Cyber Insurance: FAQs
Is cyber insurance expensive?
Cyber insurance is not costly when using CyberPolicy to compare prices from top cybersecurity agencies.
How often will my network be checked?
The frequency of network checks depends on the cybersecurity agency; some do weekly checks, while others do monthly checks.
When does cyber insurance not cover you?
Like other insurance types, cyber insurance won’t cover if you haven’t made premium payments or if there’s suspicion of fraud.
Can I get a discount on cybersecurity insurance?
Yes, meeting cybersecurity requirements may make you eligible for discounts. If not mentioned, you can ask your agent about available discounts.
In today’s digital age, cyber insurance is your shield against online threats. It’s like having a safety net for your business in the virtual world. Being prepared for cyber risks is just plain good business sense.