Today, social media activities, monetary transactions, and technology play important roles in the way organizations carry out their business and communicate with potential customers. These same vehicles can be targets for cyber attacks. Cyber crimes happen all the time, whether launched by your employees or outside criminals. The worst part of these attacks is that they cause a lot of damage and monetary losses, regardless of the size of your business. For this reason, you need a routine risk management strategy in order to decide which risks you can accept, transfer, avoid, or control. Cyber insurance comes in when you want to transfer the risks.
Even the most experienced IT professionals agree that cyber attacks and security breaches are inevitable. If your organization hasn’t yet been hit by these vulnerabilities, there is a likelihood that it will happen in the future. Planning, deployment of security measures, and policymaking may provide a form of assurance, but it is important to have an extra layer of protection for your enterprise so you can counteract unforeseen security breaches in your enterprise. This is where cybersecurity must be a priority. Taking out a cybersecurity insurance policy provides a lot of benefits, as we shall discuss herein. But before that, let’s define cybersecurity insurance.
Definition of Cybersecurity Insurance
This is a type of policy that protects businesses which face potential financial losses due to Internet-based risks or vulnerabilities associated with the transfer of information. Cybersecurity insurance is also known as cyber liability insurance coverage or cyber risk insurance. The policy mitigates the exposure of those risks by offsetting the expenses of recovering after a security breach.
What exactly does cyber liability insurance cover?
Cyber risk insurance covers the costs related to first-party and third-party claims. There are no standards for underwriting the policy, but these are the main reimbursable expenses.
- Losses caused by network downtime and business interruptions: When business is interrupted, a company suffers both reputational and monetary losses. Cybersecurity insurance provides recovery costs to manage the crises.
- Data loss recovery expenses
- Crisis management costs
- Digital forensic examinations to identify the extent and type of attack: Forensic investigations are required to determine exactly what happened to mitigate the loss and prevent a similar occurrence in the future. Such investigations require a third-party firm and also the involvement of law enforcement officers.
- Costs incurred due to ransomware and financial extortion
- Legal expenses resulting from the leakage of personal information, settling of lawsuits, etc.
- Costs of notifying clients and other affected stakeholders of the data breach: Customers must be informed of the security issue according to the law.
- Credit monitoring for employees whose data was breached: This may involve consultations with credit repair companies.
6 Reasons You Should Have Cybersecurity Insurance
1. As a precautionary measure
Imagine a situation where your company is under attack from a professional hacker. The criminal can access personal details of your employees and clients, e.g., their Social Security numbers. In addition, your site may be dismantled such that there is no way to receive payments and remain in business. But this doesn’t mean that cybersecurity insurance is a one-stop solution. Having a backup plan for unpredictable expenses cannot be compared to mitigating the effects of the attack in the first place. So, it is good to ensure cybersecurity risks but also take the necessary precautions. Insuring cyber attacks might seem like something for large companies. But the truth is that every online business requires this coverage.
2. It takes the role of risk management
Large organizations have a separate department that deals with risk assessment. Such departments are responsible for setting policies and strategies for shielding the organizations’ databases. Perhaps you don’t have such a department in your medium-sized company. Cybersecurity insurance will perform the same function. There are many ways insurance coverage bridges the gap of risk management. For instance, the insurance provider ensures that a firewall is installed to keep the network safe from external threats. They also ensure that social media policies are available on your website to minimize risks. Moreover, they want to help you because the more secure your business is, the less likely it is that there will be breaches that might call for claims.
3. To reinforce the general liability policy
Your general policy may not cover every security threat your company is facing. General liability insurance excludes Internet-based damages. That means the cybersecurity insurance covers what general insurance leaves bare. It is important to have protection for all your mobile devices and computers. If you like, you may consult the insurance broker about having the cybersecurity insurance integrated into a general policy. That is the only way to have seamless coverage.
4. You are legally responsible
Your organization may not host data itself, but it would still be responsible for a number of situations. Almost every company’s contacts are hosted in the cloud, meaning that they are still at high risk. Since it is virtually impossible to control how the cloud manipulates your information, cyber liability insurance would come in handy if the cloud messes with your data.
5. You don’t need to break the bank
Cyber risk insurance is very affordable, contrary to what some people think. If you shop carefully, you can get a premium of as little as $2000 per year. Others can reach as much as $30 million depending on your business needs. The concept is still new and so the policies available differ significantly, leaving a lot of room for negotiations. But since many companies are seeing the need for coverage, the market for cyber liability insurance will stabilize in the near future.
6. Covers more than the obvious
Most insurance policies provide first-party coverage, meaning that they only pay for such things as hiring a public relations manager to repair cyber attack damages, notifying clients of an attack, and business interruptions. With such cash flow at hand, your business can keep running as usual until the normal cash flow resumes. A good cyber risk policy covers regulatory compliance fines you might have incurred due to data breaches. Coverage for business interruptions is particularly important for small and medium-sized enterprises because their sources of income are limited. Unlike a huge corporation with numerous lines of business, a small company might crumble when its only source of revenue is under attack.
Creating a cyber risk profile for your company is a great first step to ensuring the safety of your company’s database. Before buying a policy, outline the expenses you would like to have reimbursed in the event of unpredictable incidences. From there, you can have a clear estimate of the necessary third-party expenses. Most insurers offer a calculator on their website to allow their clients to estimate the costs of their coverage. After calculating the costs, you may start your search for insurance providers. For more information, visit the Chamber of Commerce or the local trade associations.
Something to note is that cyber insurance is evolving and the risks are changing drastically. Many times, organizations do not report the exact impact of cyber attacks because they do not want to gain a negative public image and consequently lose clients. To address this concern, underwriters have limited the data upon which the financial impacts of the attacks may be determined. Nonetheless, the exact risk of cyber attack is still obscure.