In essence, cyber insurance (its other names include cyber liability insurance or cybersecurity insurance) is the contract that an entity (companies or organizations) buy in order to help reduce the financial risks associated with doing business online.
In exchange for a monthly or quarterly fee, the insurance policy transfers some of the risks to the insurer.
Cybersecurity policies can frequently change, given the dynamic and fluctuating nature of the associated cyber-risks. Unlike well-established insurance plans, underwriters of Cyber Insurance Australia policies have limited data to formulate risk models to determine insurance policy coverages, rates and premiums.
Nature
In the increasing cyber threats in the late 90s, it initially focused on data breaches and computer attacks. Over time, this expanded and covered a broad range of cybercrimes.
These would include ransomware, cyber extortion, social engineering attacks, system failures and business interruptions from cybersecurity incidents.
Cyber insurance can help reduce the financial risks associated with cybercrimes. Cyber insurance has its origins in errors and omissions (E&O) insurance, a separate form of insurance that protects against faults and defects in the services a company provides.
Mitigating financial damage
Today, cyber insurance is essential for mitigating financial and reputational damage and ensuring a resilient digital environment.
The importance of cyber insurance lies in the fact that the loss, compromise or theft of electronic data can have a negative effect on a business, including the loss of customers and revenue.
Cyber insurance at work
Cyber insurance policies are sold by many of the same providers that offer related business insurance, such as E&O, business liability and commercial property insurance.
Most policies include first-party coverage, which applies to losses that directly affect a company, and third-party coverage. This applies to losses suffered by others from a cyber event or incident, based on their business relationship with that company.
Cyber insurance policies can help cover the financial losses that result from cyber events and incidents. In addition, cyber-risk coverage often helps with the costs associated with remediation, including payment for legal assistance, investigators, crisis communicators and customer credits or refunds.
Many companies are unique in their risk profiles but they all could benefit from buying cyber insurance. These could include the following.
Businesses of all sizes
Organizations that create, store and manage electronic data online could benefit from cyber insurance. In addition, e-commerce businesses can benefit from cyber insurance, since downtime related to cyber incidents can cause a loss in sales and customers.
Likewise, any business that stores customer information on a website can benefit from the liability coverage provided by cyber insurance policies.
Healthcare providers
Healthcare companies are frequently targeted with data breaches and cyberthreats, all due to the sensitive information and patient data they maintain. These breaches cost IBM $10 million annually.
Cyber insurance is essential for healthcare organizations. To reduce the financial and legal risks connected to data breaches
Financial institutions/government agencies
Banks and credit unions are also prime targets for cybercriminals due to their sensitive nature of dealing with customer’s personal information such as social security numbers. Therefore, cyber insurance can help these institutions recover from financial damages caused by cyber-attacks.
Government agencies usually handle huge amounts of private information on many different levels. Cyber insurance can help government institutions guard against cyber attacks and assure the continuity of public services.
Educational institutions/high-revenue companies
Schools, colleges and universities typically store large amounts of personal and academic records for both employees and students. They are good candidates for cyber insurance.
Due to the potential financial rewards, companies with significant revenue streams can be great targets for hackers. To guard against the financial damages brought on by cyber-attacks and data breaches, organizations with high revenue need to purchase cyber insurance.
Application
To qualify for cyber insurance coverage, individuals or entities typically must submit to a security audit by the insurance company. Alternatively, they need to provide documentation with the assistance of an approved assessment tool.
The results from a security audit or the documentation from approved assessment tools can factor into the types of coverage provided by the cyber insurance carrier, as well as the cost of the premiums.
Policies
Cybersecurity policies can vary widely from one provider to the next. In choosing a policy, companies should closely review policy details to ensure it contains the necessary protections and provisions.
In addition, companies should evaluate whether the policies protect against known and emerging cyber incidents and threat profiles.The cyber insurance industry is expanding but it comes with some pitfalls.
Exclusions
Many cybersecurity policies exclude preventable security issues caused by humans, such as poor configuration management or the careless mishandling of digital assets.
Other issues excluded by cybersecurity policies include the preexisting or prior breaches or cyber events, like incidents that occurred before the policy was purchased, events started and caused by employees or insiders.
They also include infrastructure failures not caused by a cyber attack, failure to correct a known vulnerability. It also includes security hardening in systems or applications. Finally, it also includes the loss of intellectual property value such as proprietary information, trade secrets or other priceless intangible assets.
Benefits
Typically, cyber insurance provides protection against cyber risks. Cyber liability coverage is important to protect businesses against the risk of cyber events, including those associated with terrorism.
The insurance can provide network security coverage. Likewise, it helps in the timely remediation of cyber-attacks and incidents.
Financial security
Cyber insurance offers financial security against damage caused by cyber incidents. This includes expenses for investigations, credit monitoring services and potential legal responsibilities, among other costs associated with data breaches.
In addition, it can provide compensation for business interruption, loss of revenue and computer system restoration.
Legal support
Legal assistance is frequently included with cyber insurance, helping businesses navigate the complicated legal system around cyber events.
It can pay for the costs of legal counsel, legal compliance with regulations and prospective lawsuits brought about by data breaches or privacy violations.
Sense of security
Cyber insurance provides businesses and individuals with a sense of security by their guarantee of financial stability for their clients in the case of a cyber crisis.
This allows businesses concentrate on their core business operations without having to constantly worry about the possible financial and reputational consequences of a cyberattack.
