How often do you get clickbait emails or ones that promise you loads of money for a simple task?
A single click on any of those links, and there you are, a victim of phishing, malware, or a virus attack that can take all your information away in a jiffy.
And just like us individuals, major companies like Amazon, Sony Pictures, Volkswagen, etc. have fallen victim to these attacks in the past, resulting in huge loss of data and revenue for the company.
For this simple yet major reason, cyber insurance becomes an integral part of the risk management plan of any company to avoid any digital attacks that may come their way.
If you’re fond of the saying “better safe than sorry”, you’d want to keep reading further to implement cyber insurance into your business.
Introduction to Cyber Insurance
To put it simply, just like we have health insurance that takes care of us monetarily when we are ill and covers different ailments, in the same way, cyber insurance takes care of our company from different kinds of cyber attacks.
Technically, it’s a liability contract between the insurance provider and the entity that purchases it. It helps reduce the financial risks associated with different kinds of online threats for businesses with an online presence.
Cyber insurance is still a newly-introduced scheme, but the companies purchasing them are said to be early adopters of a new era where unpredictable and never seen before cyber attacks are rising.
Between 2015 and 2021, 65% of firms affected by ransomware lost about $1 million to $10 million standalone from online attacks.
The increasing online presence of businesses has also allowed digital thefts, so it’s important to cover your company in time to minimize this risk.
Moreover, compromise or data loss can negatively affect a business which may also incur a loss of data and revenue at the customer’s end. An example is the cyber attack on Sony Pictures back in 2011.
Their PlayStation network was breached by hackers, exposing the data of 77 million PlayStation user accounts.
Along with this, Sony had to bear a loss of $171 million in costs as they did not have cyber insurance covering digital thefts.
Many businesses are now shifting online to streamline their internal processes, increase their digital presence and adapt to newer challenges like hybrid work environments, but this also increases the need to protect company data.
Data theft, trojan, and malware attacks can be made for ransom, stealing money, or even for terrorism. This is why many organizations are now including cyber insurance as a risk mitigation strategy.
How Does Cyber Insurance Work?
You can avail of cyber insurance services from companies that provide business-related insurance like business liability insurance, E&O insurance, and commercial insurance.
Based on your selected plan, you’ll get exclusive coverage which includes first-party coverage (losses that directly affect your company) and third-party coverage (losses that affect people related to that particular business).
It also covers expenses related to data recovery, client refunds, investigations, and legal assistance.
Who’d need Cyber Insurance?
This question has a simple answer – anyone and everyone who has a business and an online presence need cyber insurance.
A general perception is that hackers usually aim for big companies, as they are high-value targets for them.
However, it’s important to understand that data is the world’s biggest business, and a small-medium enterprise’s data can also create a huge impact.
This means any business that manages electronic data, customer data, credit card numbers, and other information would need cyber insurance for the safe functioning of the unit.
How Can Cyber Insurance Help Your Business?
There are many benefits of cyber insurance for your business, some of which are highlighted below:
Protects your data from unauthorized access
Does not allow third-party systems to access your server network
Provides you with legal support in case of a cyber attack
Most insurances cover first-party and third-party damages in their policies to help with 360-degree protection for their clients. Let’s have a quick look at most of the things that cyber insurance can cover for your business
Data recovery services
Documenting and investigating the source of the breach
As cyber insurance is a fresh area, the industry is still developing, and so are the inclusions covered under them.
Some insurance companies truly understand the adverse effects on a business after a cyber attack, which is why they also include crisis communication as a part of the coverage.
It can help you connect with PR agencies that effectively communicate with your customers to rebalance your reputation.
What Cyber Insurance Does Not Cover?
Along with the inclusions, you should also know what cyber insurance does not cover. While this might differ from company to company, certain common exclusions are easy to point out.
Here are some of them:
Patents, Copyrights, and Software infringements
Physical thefts of your hardware
Damages due to wars and invasions
Loss of data due to lack of security measures to safeguard your data
Loss of devices
Third-party security breaches
Additionally, they do not cover data loss due to technical or network interruptions.
You should keep in mind that the policy compensation only includes data recovery and does not aim to improve your system or upgrade it.
So far, we’ve discussed most aspects of cyber insurance you need to know. However, it’s always a good idea to keep our minds open for more knowledge, which is why I am a fan of books that give you chunks of information that’ll help you massively.
Below are some learning resources that can help you get started with an in-depth understanding of cyber insurance.
#1. Damage Control – Cyber Insurance and Compliance
Co-authored by Joseph Burnsman, Daniel Hudson, and Kenneth Reiners, Damage Control revolves around basic to advanced-level questions related to cyber insurance.
Adnan is a BMS graduate and a senior writer for Geekflare who loves breaking down complex topics into easy-to-understand pieces. He has also written for sites like Sparkian and Techkle. Besides work, you can find him on the football turf or… read more