Cyber attacks are very common in today’s corporate world. Consequently, they are becoming an increasing concern for organizations. With cyber incidents of different intensity and nature happening every day all over the world, businesses are turning to cybersecurity solutions and cyber insurance as a way to protect themselves from harmful effects of data breaches.
In this article, we will discuss what cyber insurance is, how cyber insurance works, the different types of cyber insurance, and why cyber insurance is necessary for your organization.
Cyber insurance is a policy that allows organizations to stay protected from the adverse outcomes of a cyber attack or security breach. By having a cyber insurance policy, there is minimal disruption in business after a cyber incident actually occurs, along with a potential covering of financial costs of elements involved in the attack.
However, cyber insurance cannot protect your business against everything. Every organization today needs to have a comprehensive security information and event management platform that provides full visibility and control of your data.
Besides, organizations need to ensure that they fully understand what cyber insurance covers and doesn’t cover when signing up for a coverage plan. While insurance companies can help businesses in times of a cyber attack, the cyber security of a company is ultimately its own responsibility. This responsibility doesn’t entirely shift to the insurance company.
Thus, an effective security automation, orchestration and response platform that connects people, processes and technology to effectively manage and streamline security operations is a great way to prevent any security leak before it turns into a real problem.
Cybersecurity insurance policies are offered by most of the suppliers that also sell related business insurance, such as business liability and commercial property. Most of these policies cover first-party coverage, which includes losses impacting a company directly. They also include third-party coverage, applying to losses that are suffered by a third party as a result of a network security breach or incident.
First party coverages include the costs of insurance work, such as investigating the cybercrime, recovering lost data and restoring information lost during the incident. It also covers the recovery of income lost as a result of the business shutting down, reputation management, notification costs, and extortion payment made by cybercriminals.
Organizations are obligated to keep the Personally Identifiable Information (PII) and Personal Health Information (PHI) of their customers protected. If this information is exposed in the event of a data breach, they may face liability. Third-party cyber risk coverage includes the costs of legal defense against claims of GDPR breach, crisis communications, a digital forensics team, and setting up credit monitoring and a call center for parties affected by the breach.
Cyber insurance packages can take many different forms, depending on the criteria. For instance, they can be classified on the basis of locality, coverage, or risk. However, the following are generally the key types of cyber insurance available for individuals and businesses.
In this case, insurance packages are designed to pay for the damages, costs, and inconvenience caused to the owner due to the security breach. Some of these are as follows:
Fraud and Theft: This policy covers payment for costs arising out of data loss due to fraud or theft. It may also cover risk management of crimes resulting from dishonesty or fund transfers.
Forensic Work: This policy covers the costs of conducting forensic investigations. It pays for all legal and technical services required to meet the standards of the presiding court.
Business Interruption: This type of cybersecurity insurance policy covers the costs of business interruption after an incident. This is identified by the policyholder being unable to carry out routine business due to the cyber attack.
Blackmail and Extortion: Many cybercrimes involve blackmailing and extortion by criminals to destroy the intellectual property of a company if it fails to pay a ransom amount. The policyholder may pay the amount to save themselves from reputational damage, or at times, to help assist in collecting evidence against the perpetrator.
Loss of Data: A first-party insurance coverage policy may cover the costs of data loss and restoration required to bring operations back to normal. These costs may include repairing and replacing damaged computer systems and other organizational assets, such as electronic data.
Different packages in third-party coverage are as follows:
Litigation Coverage: This covers costs incurred on meeting obligations arising out of lawsuits, court judgements, fines, and penalties imposed as a result of an incident.
Regulatory Coverage: This type of insurance helps in covering costs for all technical and forensic services that are carried out while responding to a government order or request. It may cover costs incurred after an incident where the government wants to know the causes of the incident and prevent it from happening in the future. It may also pay if the policyholder is fined after an inquiry.
Notifications and Communications: This covers costs related to communicating with stakeholders about the incident and how you are dealing with it. These stakeholders may be your clients, employees or third parties.
Emergency and Crisis Management: This type of insurance deals with emergency or unexpected events requiring extraordinary responses, such as posting warning signs to the public after a security breach.
Credit Monitoring and Review: If a policy owner has to work on credit monitoring and review along with anti-fraud procedures, this policy will compensate them.
Media Issues: This package covers expenses regarding media overtures after an incident. In case of copyright infringement, it may cause insurance costs to be met to avoid any further general liability.
Customer Privacy: This type of insurance policy covers the costs that may arise as a result of a breach of confidential customer information, such as bank account details.
If your business deals with sensitive customer data like names, bank details, or addresses, you need to protect this data, as it can be compromised during a cyber attack. You will also need to protect yourself against financial losses that may be incurred as a result of heavy fines if your customers’ PII is leaked, stolen, or lost.
If your company is subjected to a breach, cybersecurity insurance can help you as a lifeline, while legal fees, potential fines and claims keep adding up. However, it is also important to ensure that you follow all security best practices necessary to protect your business, since having an insurance policy alone cannot prevent a data breach or cyber attack. Before you make a claim, it is expected that you have all these proactive measures in place.
There are various reasons to have a cyber insurance policy for your company. In order to prevent security breaches and potential damages that will occur from a cyber attack, the company in particular needs full-functioned protection.
Companies need to be well prepared for all sorts of cyber attacks. Even though having a cyber insurance policy can give a bit of relief to stakeholders of the company, finding those cyber threats and eliminating them beforehand to prevent any damage is vital.
Logsign has a sharp focus on moving security operations of businesses to the next level with its Next-Gen SIEM Platform and SOAR Platform. Feel free to read more about our SIEM & SOAR use cases.
It is a great time to look back on cybersecurity statistics for 2021 and predictions for 2022.
Explore different types of security vulnerabilities and how to manage them.