Who Needs Cyberinsurance?
Cybersecurity threats have been increasing over the last decade, as have successful breaches. In fact, research showed that in 2018, there were 1,473 million cyberattacks globally and the cost of a data breach to companies worldwide was around $3.86 million.
Since the COVID-19 pandemic, cybercrime has risen by 600%, meaning the cost of a breach is likely to have increased, as well. But sadly, no matter how high-tech your security systems may be, it’s impossible to prevent cybersecurity incidents altogether.
It’s easy to see, then, why cyberinsurance policies have also increased in popularity and, for many, have become a necessary part of protecting their business. But it’s not just the largest enterprises or the most high-tech startups that need cyberinsurance—it’s important for every business.
What is Cyberinsurance?
As cybersecurity threats continue to rise, cyberinsurance has been created specifically to help protect businesses from attacks and mitigate the potential financial costs associated with cybersecurity incidents.
These policies have been designed to protect businesses from common threats in today’s digital age. For example, data breaches or malicious hackers trying to gain access to your data and systems.
Cybersecurity insurance coverage can provide crucial support to keep businesses stay afloat in the event of a data breach or attack. This is something that most standard business insurance policies don’t cover, which is why a separate policy is often necessary.
How Does it Work?
As we mentioned earlier, cybersecurity incidents can be very costly to a business. This is because a security breach can have a number of direct and indirect costs. Some of the key costs could be:
- The time and resources needed to deal with the breach
- Costs associated with boosting their cybersecurity after the incident
- Regulatory fines such as general data protection regulations (GDPR)
- Lost opportunities and customers as a result of a now-damaged reputation
- Lost revenue due to system or website downtime
- The costs needed to rebuild their reputation after the incident
As you can imagine, these costs will quickly add up. So, if a business suffers a cybersecurity incident, they must then submit a claim as quickly as possible to their insurance provider, wait for their team to investigate and hope a payout is forthcoming.
The longer it takes for the insurer to do this, the higher the overall costs to the business may be.
Of course, some security incidents cause issues that can’t be fixed just by offering financial reimbursement alone. For example, lots of time and resources will be required to help rebuild the company’s reputation which can take time away from daily activities and new innovation.
What Does a Cyberinsurance Policy Typically Cover?
We’ve briefly touched on this in the previous section, but it helps to know what a cyberinsurance policy typically covers. For the most part, it will cover the direct financial costs that occur as a result of cyberattacks and data breaches, as well as some other security issues that may impact your IT systems and networks.
Although policies will always differ depending on the size of the business and the insurance provider, they typically provide organizations with the means to manage the incident. This includes:
- Forensic investigation
- Incident response
- Regulatory fines
- Legal assistance
- And in some cases, public relations support
But as we said, what each policy covers will vary depending on the specific policy, provider and needs of the company.
What is Not Covered?
It’s also worth noting that there are some things which aren’t covered. For example, these policies rarely cover damages that were caused or exacerbated by employees as they tried to manage the incident or for acts of gross negligence.
This is why having an effective action plan in place is crucial for businesses, as is ensuring that every employee is clued in to cybersecurity best practices and knows what to do in the event of an attack.
Not only that, but most insurance providers won’t reimburse businesses that pay ransom after a ransomware attack. This is because experts advise companies to never pay a ransom because this payment helps fuel the cybercrime industry. Plus, that could make the organization a bigger target in the future.
So essentially, you need to make sure you get a policy that covers everything your business needs and that you always read the fine print so there are no nasty surprises down the line.
Who Needs Cyberinsurance and Why?
As businesses are responsible for the data they collect and store, they must ensure they have all the right security procedures in place, including having the best possible cyberinsurance policy. But you might be wondering whether cyberinsurance is something every company needs and whether this applies to you—particularly if you own a very small business.
Put simply, any company that relies on IT or processes sensitive data could be vulnerable to a cyberattack. Therefore, if you collect and store data in any way—be that through customers, vendors or other third parties—you should consider cyberinsurance.
Why do we say this?
Well, just in case it hasn’t become apparent yet just how important and helpful cyberinsurance can be, here are six reasons why nearly every business should consider a cyberinsurance policy:
- No business is exempt from cybersecurity threats! No matter how big or small your company is, you could still be a target
- Data is a critical business asset, yet most standard business insurance policies don’t protect this, so you need a separate policy that will
- You could face severe penalties in the event of a breach that leads to lost data and without insurance, this could bankrupt your business
- You may have to shut down your site or turn down customers after a breach, and it’s also likely that your reputation will be damaged—all of which will cost you money
- Complying with data regulations can be expensive and time-consuming
- Your business could be faced with legal action from customers, vendors or third parties if you experience a data breach that puts their information at risk. Therefore, you’ll need to be able to pay for legal advice and cover
Those are just six reasons why you should consider cyberinsurance for your business today, no matter how big or small your company may be.
