Cyber Insurance, an essential weapon for your company. In the modern world of the internet, cybercrimes especially data breaches are becoming a commonality for companies, small and large scale businesses and even corporations. Such breaches are inevitable and most businesses know that they are going to happen over time. They leave businesses with huge and irreparable data losses and the risk of bankruptcy. Because cyber security threats are only overcome by taking expensive measures that cost a lot more than what most businesses can pay for.
More cybercrimes such as eavesdropping, phishing, viruses, worms, scams, hacking, intrusions of various kinds, and denial service attacks also contribute to the increasing need of cyber security for businesses. Currently, a large industry including McAfee is carrying out research efforts centered on creating and devising tool and technologies that can detect cyber security threats and abnormalities in the cyber infrastructure. Despite these efforts over the last decade, cyber security methods and techniques have failed to achieve the perfect or near-perfect security protection due to software, hardware, and cryptographic methodologies. The failure arises because of a number of reasons, a few of which are given below:
- Extreme difficulty in developing solutions that can cater network attacks based on variable intentions
- Confused and misused incentives between security product vendors, network users, and regulatory authorities with regards to keeping the network secure and protected
- Cyber security vendors have no profits of introducing diligent products in the market
- Difficulty in measuring risks that contribute to challenges in designing risk removal solutions
- Dearth of sound technically feasible solutions
- Efficiency of users in taking advantage of benefits of technical solutions
Therefore, all cybercrimes make businesses vulnerable as they have no sound means of risk management whatsoever. And in order to plan risk management, businesses need to figure out what measures need to be taken separately for distinct types of risks. One such essential measure that proves vital in solving their problem is an insurance called the Cyber Insurance.
What is Cyber Insurance?
Cyber Insurance, sometimes also referred to as cyber insurance policy, cyber liability insurance coverage, and cyber risk insurance, it helps businesses and organizations in covering up the finances related to the loss of information or damage to networks and IT systems. Cyber Insurance also protects businesses from various risks that are related to information technology activities and infrastructure. It has its roots in Errors and Omissions (E&O) insurance and started getting the attention of mainstream IT companies back in 2005. Currently, at least one in three US companies has some sort of Cyber Insurance and the total value of premiums of Cyber Insurance are forecasted to reach $7.5 billion by the year 2020.
As previously mentioned, both prevention of cyber risks and maintenance of cyber security are expensive responsibilities. According to a UK Government survey, the average cost of a cyber security breach can be anywhere from 600k GBP to 1.15m GBP for large scale businesses and from 65k GBP to 115k GBP for small businesses. So, although previously existing insurance policies including business interruption, commercial property, and professional indemnity insurance provide some coverage to a few cyber risks but for complete coverage of a range of cyber risks, most businesses are now buying specialized Cyber Insurance along with their regular insurances. Businesses also prefer to buy specialized Cyber Insurance due to the following reasons:
- They handle and process payment card information
- They request and hold considerably sensitive customer details including names, addresses, and banking information
- They are reliant on websites and IT systems for their successful operation
What Does a Cyber Insurance Cover?
As mentioned earlier, Cyber Insurance also protects businesses from various risks that are related to information technology activities and infrastructure. These risks are classified into the first party and third party risks and Cyber Insurances usually cover either or both types of risks. Hacking, data destruction, theft, extortion and denial of service attacks are a few of the most notorious cyber risks. To elaborate what elements of both the first and third party risks a Cyber Insurance can cover, here is a coverage list for first party risks:
- Interruption of business due to downtime
- Loss or damage of various digital assets including software programs or essential data
- Damage to reputation due to security breaches which might result in the loss or theft of customer and intellectual property respectively
- Case of cyber exhortation if a third party threatens to release or damage data due to nonpayment
- Theft of money or equipment
Similarly, coverage list for third party risks is as follows:
- Loss of third party data or failure of systems or software
- Investigation of the breach
- Civil damages due to defamation
- Negligence in publication in print or electronic media
- Defense costs and civil damages associated with security or privacy breach
Why Would a Business Need Cyber Insurance?
Big or small, all businesses are vulnerable to cybercrimes of various sorts, one example being cyber hacking. Businesses deal with sensitive data such the names, contact information and even social security numbers of their customers which often are of extreme importance not only to the business itself but also to a cyber hacker. Furthermore, the traditional insurance policies such as standard property and business insurance do not cover the high-value assets of a business. Such assets are not even covered by the so-called business interruption insurance policy, which leaves businesses with the specialized insurance policy catering cybercrimes known as the Cyber Insurance.
The US and all the first world countries currently have strict cyber security laws along with considerably appropriate penalties and punishments. But even such laws have not been able to stop hackers in their usually successful attempts of telephone hacking, identity theft, and phishing scams. Hackers also use various types of worms and viruses to virtually take over the network, system or the whole IT infrastructure of a business. For such desperate times, large scale businesses usually employ hundreds of people to devise risk management strategies that would safeguard the business from the perils of the cybercrime. But because small businesses cannot afford to employ hundreds of people to devise risk management strategies, they require a good insurance and a good insurance carrier to help them with their risk management.
Cyber Insurance and its providers prove to work best for the best interests of small businesses as they make sure that the business has all the necessary protection kept in place. They also make sure that a business has a firewall ready to protect its network and suggest social media policies that keep the business risk free. Most businesses live in the misconception that since their data is stored in the cloud, therefore, they are safe. But the reality is far from it. Because even clouds can get hacked and businesses are still liable for such a breach. Even in such instances, a Cyber Insurance keeps the business financially covered and protected.
What are the Benefits of a Cyber Insurance?
Suppose your company or small business comes under the attack of a skilled hacker who happens to be after all the valuable data that is present on your network. This data includes names, addresses, contact numbers, social security numbers, and bank account information of all your loyal customers. So just within a few minutes, all this data is taken away from you and your business is left to accept the fact that it has been hacked. Hacking without a doubt is a crime but networks and websites of most business are always vulnerable to a hacker’s attack. Therefore, it is a very nice idea to have Cyber Insurance in place for such times of desperate need. It would protect your business from the theft of data, equipment, and even defamation.
These benefits of a Cyber Insurance are just the tip of the iceberg and to dive deep into the many benefits of this insurance for companies and small businesses, a list of notable benefits of Cyber Insurance is given as follows:
- Financial Stability and Resilience: A Cyber Insurance keeps companies and small businesses financially stable and resilient if they ever encounter a cyber-attack or get exposed to a cyber risk. Cyber Insurance helps businesses mitigate the insured aspects of their loss or theft and quite quickly recover the insured out-of-pocket losses.
- Affordability: A Cyber Insurance policy is a lot more affordable than you might have previously thought of. The lowest of these insurances start from about $2,000 and then can go up to about $30 million with deductibles as low as $10,000. It all depends on what a company or small business requires and how much they are willing to pay. With a lot of room for negotiations, companies and small businesses can definitely get the Cyber Insurance that would not break their bank.
- Tailor-made for Cybercrimes and Cyber Risks: There are a number of instances when traditional and commercial insurance policies simply fail to cover the liability arising out of the physical property, such the server on which the data is stored instead of the data itself. Therefore, a Cyber Insurance policy helps small businesses to get better coverage if they ever come under a cyber risk or cyber-attack.
- Remarkable Coverage: Cyber Insurance covers quite simply anything and everything from laptops to mobile devices, network to servers, and data to websites. This way, small businesses stay completely covered and fully prepared in wake of a cyber security threat or cybercrime.
- Fulfills the Need of a Risk Management Team: Understandably, risk management teams comprise of a lot of people that are only dedicated and concerned with devising risk management strategies, something companies and small businesses cannot afford. Therefore, instead of having their own risk management teams, companies and small businesses can get a Cyber Insurance policy that actually works for them exactly like a risk management team would work. Because the carrier that provides the Cyber Insurance policy suggest security measures that help to safeguard the essential assets of the company or small business and reduce cyber risks.
- Provides Streamlined Contracts: If a company or small business regularly works on the basis of contracts with third parties, accessing, processing or storing protected information then a Cyber Insurance can keep the company or small business protected if anything goes wrong. This insurance also keeps the third parties protected which encourages them to work with the said company or small business.
- Provides Resources to Respond to Cybercrimes and Cyber Risks: In the wake of a cyber-attack or cyber risk, a number of Cyber Insurance carriers provide resources through approved vendors or informal referrals for a response. These resources usually include a cybercrime response coach, an attorney who guides the affected business through the cybercrime response process and tries to limit the business’ legal exposure. The Cyber Insurance carriers also provide referrals to a wide variety of service providers which include data breach notification, forensics, and legal and PR at reduced prices. Moreover, Cyber Insurance carriers are also experienced enough to handle the task at hand, something which even a business’ legal counsel might not be able to do as efficiently.
- Contribution to Stronger Public Security Stance: Having a Cyber Insurance makes companies and small businesses disclose their financial position on cyber risk. This, therefore, helps the governments of the respective countries to create a record of actively managing cyber risks and then try to work on their feasible and effective technical solutions.
What Does a Business Need to look for in order to buy the appropriate Cyber Insurance?
Cyber Insurance, comparatively, is still a new product for the many well-known insurance companies but due to the increasing demand of IT companies and small businesses, it is soon destined to become a part of every insurance company’s product line. Though, just like any typical insurance, a Cyber Insurance coverage differs according to the policy and the insurer. There are a number of factors companies and small businesses need to look for while comparing the various Cyber Insurance policies of competitive insurance companies. Although these factors are not the only quantifier that is going to help companies and small businesses to decide on a particular Cyber Insurance policy because of their own separate interest, but these factors do help companies and small business in shortlisting their options.
To further elaborate what these factors are, given below is the list of a few of them:
- Types of Policies: There can be instances when a single insurance company offers multiple Cyber Insurance policies. This gives companies and small businesses great options and more variety in making the best suitable selection. Though, a stand-alone policy always proves to be much more compact and complete to suit the needs of companies and small businesses.
- Deductibles: It is important for the companies or small businesses to compare the deductibles of insurers before making an educated decision.
- Coverage of Social Engineering: Spear phishing, phishing, and advanced persistent threats, all include an essential role played by social engineering. Therefore, it is better to select a Cyber Insurance policy that covers social engineering.
- Time Frames of Coverage: Some attacks are slow and can happen over a period of time, which is why it is a good idea to already confirm if a Cyber Insurance is going to include the time frame of the coverage.
- Coverage of First and Third Parties: Companies and small businesses do get involved in contractual bindings with third parties. This makes both the first and third parties vulnerable if either one of them is hacked or face a cybercrime. Therefore, it is a good idea to confirm which Cyber Insurance policies cover either or both first and third parties.
- Generic Attack or Targeted Attack: Businesses can become a part of a generic cyber-attack, such as the spreading of a worm or virus that destroy any system, network, or website in the process of infecting. Whereas, businesses also face a targeted attack which actually targets on them. Cyber Insurance policies can be different for both of these attacks and therefore, it is better to compare the separate Cyber Insurance policies according to the business’ requirements.
- Coverage of Non-Malicious Actions of an Employee: Sometimes the security of digital assets of a company or small business can get compromised due to the non-malicious actions of an employee. This issue can be resolved using a Cyber Insurance but different types of them handle this issue differently. Therefore, it is better for the company or small business buying the Cyber Insurance to confirm their own suitability and requirements.
Final Words of Wisdom:
So, if you have decided to purchase a Cyber Insurance for your company or small business then this might be the best decision in the interest of safeguarding your invaluable digital assets. Now to finally purchase a Cyber Insurance, you should create a cyber risk profile of your company or small business and then list down the expenses you want to be covered in case of an unfortunate event. You should also calculate the estimate of third party costs. All of these calculations can be done on the website of one of the many insurance companies that provide Cyber Insurance. Finally, select the insurance company that you feel comfortable with and secure your business for the future!