Cyberattacks are on the rise at a global level. Some of the biggest companies in the technology space, like Google, Meta, Microsoft, and Dropbox, have either thwarted major security attacks or have fallen victim to data breach issues.
Cybercriminals are getting sophisticated with their attacks. Cybersecurity measures are your first line of defense against these attacks. But despite measures, if events like data breaches take place, your company stands to lose a significant amount of money, reputation, and trust.
Cyber insurance is a policy that can help hedge a business from the potential fallouts of a cybersecurity attack.
The article will look at cyber insurance – what it is, what it covers, what it does not cover, and why it is essential for technology-oriented businesses today.
What is Cyber Insurance?
As a business, you might deal with sensitive data that needs to be protected. There are government rules and regulations in place that enforce strict compliance measures. But in case of a data breach, the business may face liability.
Cyber insurance is a product that will help protect the company from the potential after-effects of a cyberattack. As a result, it may help you carry on with business operations with minimal disruptions.
The actual plan may differ from one provider to another, but it may cover areas like third-party liability, data recovery, legal counsel, system forensics, and money lost, among others.
How Does Cyber Insurance Work?
Cyber insurance is also known by other names like cybersecurity insurance, cyber liability insurance, and cyber risk insurance.
Before you buy an insurance policy for your business, it is essential you understand what the policy covers and does not.
The actual clauses will differ depending on the insurance provider and the unique requirements of your business, but here are some typical areas cyber insurance can help with.
1. Notifying Customers
When a data breach occurs, depending on the local rules, companies are required to notify users when personally identifiable information is involved. So, the insurance may cover the costs the company spends on this process.
2. Identifying and Fixing Security Issues
Most companies have cybersecurity measures in place. So, if a criminal does make it past their defenses, companies need to understand what happened, how it happened, and fix the issue. If not, the vulnerability may easily be exploited by the hacker again.
The company may hire a digital forensic team and cybersecurity specialists to investigate the issue and fix the cause. Cyber insurance may cover some parts of the investigating and fixing process.
3. Recovering Data
You first need to identify the extent of the data breach and what and how much data you have lost. There are data recovery specialists who can help evaluate the extent of the damage. These specialists offer services like decryption, database repair, and deleted file recovery.
If you have up-to-date data backups in place, the same can be used for data restoration once your IT infrastructure is fixed up and cleaned. Cyber insurance may cover some costs of the data recovery process.
4. Other Expenses
Depending on where your company and customers are based, there might be several different regulations to follow. Therefore, you will need legal expertise throughout the investigation, fix, and customer repatriation process.
Some insurance providers may also offer betterment coverage. This means they may cover the costs of security measures you take to strengthen your IT infrastructure and fix vulnerabilities to avoid such breaches in the future.
What Does Cyber Insurance Not Cover?
If the cyberattack was a result of intentional acts within the company, the provider might not cover any damages incurred.
Any bodily or property damage incurred as a result of the cyberattack will not be covered by cyber insurance. However, one can make such claims under general liability insurance coverage.
Cyber insurance may cover the cost of damages resulting immediately after the cyberattack but not in the long term.
For example, customers may lose faith in your business as you fail to protect their sensitive data. In addition, your company’s reputation may take a hit in the marketplace. All these factors can result in loss of customers and revenue in the long run.
Cyber insurance will not be able to protect your business from the long-term effects of a cyberattack.
Do You Really Need Cyber Insurance?
Technology is increasingly being integrated into all aspects of running a business. Technology can make your life easier, but it also opens up your business to cyberattacks.
According to a report by Statista, at a global scale, 15 million data records were exposed as a result of data breaches in the third quarter of 2022. This number is 37% higher than the previous quarter.
Cybercriminals are becoming more sophisticated when it comes to such attacks. Ransomware, phishing, denial of service attacks, and social engineering are some of the common means employed today to gain access to an organization’s IT infrastructure.
Businesses that deal with sensitive customer data, own intellectual property, use online tools, or store data in electronic format may benefit from cyber insurance.
Is Cyber Insurance an Alternative to Cybersecurity?
No. Cyber insurance can never be an alternative to cybersecurity. Having insurance does not shift the responsibility of protecting your business assets onto the insurance provider.
You are still responsible for safeguarding your IT infrastructure and data, be it on the cloud or onsite.
You can adopt practices like regular backing up of data, training employees in security principles, using VPN to privatize connections, and using two-factor authentication and encryption policies, among others.
You can also work with IT help desk outsourcing companies. They can help keep your applications and tools updated. They can configure and deploy new software; this way, you can avoid configuration issues that later turn into system vulnerabilities.
They can also help protect data, ensure compliance across all devices and guide you on other security practices and tools.
Cyber insurance may provide coverage to businesses in the aftermath of a cyberattack. It may cover aspects like legal counsel, customer communication, hiring of digital forensics, data recovery and cybersecurity experts, investigation, and fixing of the issue.
If you are a business that deals with sensitive data and uses software and other applications, it would be best to opt for cyber insurance. However, do understand what the policy does and does not cover for maximum protection.