Headlines about ransomware attacks, data breaches, and other forms of cyberattacks are in the news every other day. In 2021, we saw a significant uptick in cybercrime, and the predictions for 2022 don’t look great either. As a result, businesses, both big and small, are raising the question of what measures they can take to mitigate the risks and enhance their odds of surviving a cyberattack.
In part, the solution to this problem is cyber insurance. This post will walk you through what cyber insurance is and why businesses should have cyber insurance cover.
Cyber insurance or cyber liability insurance is a contract/policy that offers coverage to help protect a business in the event of a data breach and other cybersecurity issues. A cybersecurity policy generally covers financial losses that come about due to viruses, data breaches, cyber extortion, and other cyber incidents. These financial costs include:
Many cybersecurity policies exclude preventable security issues such as mishandling of digital assets and poor configuration management. Other issues excluded are:
Regardless of the type of insurance policy you’re purchasing, there are certain characteristics of your business that are considered the main drivers behind the cost. That means that the cost of cyber insurance will vary depending on the type of business and the level of cyber risks it is exposed to.
According to a 2020 AdvisorSmith study, the overall annual average cost of cyber insurance in the US is $1485. Of course, businesses pay much more or much less for their coverage depending on various factors such as:
Recovering from a cyberattack can drain your business both of money and time. Every state mandates that you quickly notify the parties whose personal data has been affected by the attack. If you fail to do this, you may end up incurring heavy fines and penalties. You must also investigate and correct the security vulnerabilities that made the breach possible. The cost of remedying weak cybersecurity can be significant and is the reason why most small businesses have flimsy security in the first place.
The costs don’t end there. Expenses may continue to add up after months or even years down the road. You’ll have to cater to various costs such as ransom demands, lost revenue, cost of investigating and remedying security weaknesses, regulatory fines, customer notification costs, potential lawsuits, just to mention a few.
Given how high the cost of cyber insurance can be, you are probably wondering whether it is worth it. The answer to that is YES. The costs incurred immediately following a data breach are significant, plus you’ll also have to factor in the hidden costs. Cyber insurance offers numerous mitigation measures and high insurance limits to cover the costs of a breach.
Any business with an online component or one that sends or keeps electronic data might benefit from cyber liability insurance, as may any entity that depends on technology to conduct its operations. In today’s tech-oriented world, this is pretty much every business.
Personal identifiable information such as contact details of staff or customers, sensitive financial data, or intellectual property are all potentially lucrative to cybercriminals who may attempt to break into a business’s network to steal them.
There is also the potential for hackers to cripple networks with ransomware and other malware. A cyber insurance policy can go a long way in helping organizations that fall victims to cyberattacks find their way out of that predicament.
The type of cyber insurance your business decides to purchase should always be based on its needs and which entities need to be protected. When it comes to cyberattacks, it’s not only the business that is under attack that can potentially suffer losses. Because of this, there are two types of cyber insurance policies, namely first-party and third-party.
First-party cyber insurance protects your business. It covers all the costs related to a cyberattack, including:
Any organization that deals with electronic data should have first-party coverage to take care of the expenses that arise as a result of a cyber event compromising the company’s data and that of their clients, customers, and partners.
Third-party cyber insurance is designed to protect businesses that offer professional services to other businesses that can be compromised by cyber threats. Third-party insurance can offer protection in case another company is suing you for mistakes that you made, which led to that company suffering losses or damages.
As cyberattacks continue to become prevalent and cybercriminals develop more sophisticated techniques, the way cyber insurance operates is going to change. As mentioned earlier, cyber insurers are unlikely to want to offer policies to entities that pay minimal attention to their cybersecurity.
Paying out insurance claims is a reactive course of action and is costly for cyber insurers. And this is the reason why some of them are beginning to take a more proactive approach to cyber insurance –they are actively aiding their clients to adopt a better cybersecurity strategy. The cyber insurance industry is transforming from being a lender of last resort and pay-outs to more like a risk advisor and partner to your business.
Navigating the maze of cyber insurance can be a daunting task. Cyber insurance applications are becoming increasingly complex and technically exhausting for the average business professional. The technology involved in cyber insurance goes wide and deep. As such, it is crucial that you have the right partner in your corner to help you ensure that you get the right coverage and that you are properly protected in case of a cyberattack or a data breach.
OneSource Technology is here to ensure that your application for cyber insurance is completed correctly and that you have the required cyber security solutions in place to adequately protect your organization. Start a conversation with us today, to ensure that all your bases are covered.