In today's digital age, cyber-attacks have become an ever-increasing threat to businesses of all sizes. From data breaches to ransomware attacks, organizations are constantly at risk of falling victim to malicious cyber activities. This blog post aims to emphasize the critical importance of having cyber insurance to safeguard your business and understand why cyber insurance is no longer a luxury but a necessity for the survival and resilience of your organization.
Here’s a quick look at the cybercrime and insurance statistics:
- Around 2328 cybercrimes are thought to occur each day. Over the last 21 years from 2001 to 2021, cybercrime has claimed at least 6.5 million victims with an estimated loss of nearly $26 billion over the same period.
- 80% of reported cybercrimes are generally attributed to phishing attacks in the technology sector.
- The global annual cost of cybercrime is predicted to reach $8 trillion annually in 2023.
- According to a survey from consulting firm RSM, 68% of mid-market companies have cyber-specific insurance plans compared with 61% last year, while 70% of larger companies have plans compared with 57% last year.
- The Global Cyber Insurance Market is valued at USD 7.49 billion in 2021, and the cyber insurance industry is projected to reach a value of USD 28.445 Billion by 2028 at a Compound Annual Growth Rate (CAGR) of 24.90% over the forecast period.
What is Cyber Insurance?
Cyber insurance, also called cybersecurity insurance or cyber liability insurance, is an insurance policy designed to protect businesses against the financial implications of cyber-attacks or data breaches. It outlines the key components and coverage areas typically offered by cyber insurance policies, including data breach response, legal expenses, regulatory compliance, business interruption, and reputational harm.
Benefits of Cyber Insurance:
No matter what the policy includes, every business stands to gain from having cybersecurity insurance. The main reason businesses invest in cyber insurance is to address concerns about data security. But it also helps companies to find existing threats and vulnerabilities, achieve or maintain regulatory compliance, and secure customer-facing services and applications as part of a comprehensive risk management program.
- Forensic Investigative Support
- Data Breach Coverage
- Defense Against Cyber Extortion
- Reimbursement For Business Loss
- Legal And Regulatory Compliance Support
- Incident Response Support
- Reputation Management
- Risk Management And Prevention Program
How Does Cyber Insurance Work?
- The cybersecurity insurance process works similarly to other forms of insurance. The Policies are offered by many suppliers that provide other forms of business insurance.
- Insurers offer various policies designed to cover common cyber risks, liabilities, and associated costs. But to have the right coverage for your company, you and your agent can work together to tailor the coverages based on the specific risks your business faces.
- And often, cybersecurity insurance companies will work more closely with the business during the underwriting process to identify coverage needs as well as existing compliance efforts.
- Most cybersecurity insurance policies include first-party coverage, which applies to losses that directly impact a company, and third-party coverage, which applies to losses suffered by others from a cyber event or incident based on their business relationship with that company.
Cyber Insurance Coverage
What Does Cyber Insurance Cover?
Cyber insurance policies generally have two main types:
First-party coverage - The most common type of coverage that covers cyber-related losses directly impacting a business.
It typically includes:
- Forensic investigation expenses
- Customer Notification Costs
- Legal and regulatory defense costs
- Business interruption, covering loss of revenue due to a cyber-attack
- Cyber extortion fees, such as paying a ransom to restore access to data and systems
- Data and digital asset restoration costs
- Crisis management, covering expenses of hiring a public relations team to manage reputational damage after a cyber-attack
- Reputation monitoring and repair services
- Costs related to credit monitoring and identity theft protection for affected individuals
Some Common Claim Scenarios for First-Party Cyber Insurance
- Data breaches or leaks
- Cyber theft or extortion
- Ransomware attacks
- Social engineering or phishing attacks
- DDoS (distributed denial of service) attacks
- Network outages leading to data loss
Third-party coverage - Covers losses suffered by third-party entities or companies from a cyber incident.
It provides liability coverage for businesses that are responsible for a client's online security. This includes protecting clients from cyberattacks and data breaches. If a client experiences a cybersecurity breach and sues, third-party cyber liability insurance can pay for your business's legal expenses.
Many businesses in the information technology field can benefit from the protection of third-party cyber coverage. Other IT businesses that can benefit from this policy includes IT consultants, software developers, app developers, network and security consultants, website designers, web hosting businesses.
This policy can cover expenses such as:
- Legal fees
- Accounting costs
- Judgments if the business is found liable
- Payments to consumers
- Losses related to copyright or defamation infringement
What Does Cyber Insurance Not Cover?
- Pre-existing cyber events or prior breaches occurred before the policy implementation.
- Funds not associated with cybercrime coverage - include the loss, theft, or transfer of funds, securities, and currencies.
- Environmental disasters that lead to business interruption, like floods, gas leaks, or electrical failures.
- Unresolved vulnerabilities that the company had prior knowledge of but failed to remediate.
- Implementation costs of programs such as Cybersecurity enhancement and risk management.
- Injury or property damage.
- Infrastructure failures are not caused by a purposeful cyber-attack.
- Poor data management and mishandling of IT and digital assets.
- Insider attacks like fraud or criminal misconduct.
Factors to Consider When Choosing Cyber Insurance:
Selecting the right cyber insurance policy requires careful evaluation and consideration of various factors. Businesses should assess their specific cyber risks and vulnerabilities, understand coverage options from different providers, and engage experienced insurance brokers specializing in cyber insurance. Tailoring the policy to the organization's unique needs and risk profile is essential.
As cyber threats continue to evolve, organizations must consider cyber insurance as part of their risk management strategy to safeguard their operations, customers, and brand reputation. By taking decisive action now, businesses can ensure they are well-prepared to face the challenges of the digital age and recover swiftly in the event of a cyber-attack.