Cybersecurity attacks can cost a company millions of dollars―even force some organizations to shut down. From a business perspective, it’s important to take cybersecurity seriously.
In addition to finding the appropriate security solutions and services, you might wonder whether cyber insurance might be a worthwhile investment.
The What of Cyber Insurance
A cyber insurance policy―which is often referred to as cyber risk insurance or cyber liability coverage―is intended to help a firm reduce risk exposure by offsetting some of the most substantial costs that result from cyberattacks and data breaches.
Cyber insurance is a fairly new type of policy (comparatively speaking). It has its roots in errors and omissions (E&O) insurance, which was essentially a precursor. Since cyberattacks have become so frequent and sometimes costly, the burden of protection has shifted away from E&O policies and toward cyber risk insurance.
By the end of this year, the collective value of premiums for cyber insurance has been projected to reach $7.5 billion. What was once a luxury or nice-to-have for large organizations that could afford to pay such premiums is now all but a must-have.
In fact, we’re seeing situations where many clients are unwilling to work with insurance providers that don’t offer the right cyber products. There is no standardized underwriting process, but most cyber insurance policies cover common reimbursable expenses such as:
- Forensic investigation. You might be aware that your business has been compromised, but in order to assess the extent of the damage and how best to respond, you might require a forensic investigation. This will entail the hiring of a third-party firm. It might even require coordination with local law enforcement and/or the FBI.
- Business losses. A cyberattack can lead to substantial losses. They might include direct costs associated with downtime, data loss recovery, lost sales, and even reputational damage repair. Cyber insurance could cover some or all of these costs.
- Mandated response. Businesses are required by law to notify customers when their data has been exposed or compromised. If there’s been an actual breach, you’re mandated (in most jurisdictions) to offer creditor monitoring to these individuals. A cyber insurance policy can help to offset these costs.
- Lawsuits. When there’s a serious data breach and sensitive data is exposed, it’s not unlikely that someone may file a lawsuit against your firm―possibly even a class-action lawsuit. A good cyber insurance policy will protect you on this front.
- Ransomware extortion. One of the essential factors of ransomware is the “ransom” attached to the attack. Believe it or not, many cyber insurance policies will actually cover the costs of cyber extortion (up to a certain amount).
Since no two cyber insurance policies are the same, it’s imperative that you take the time to analyze the details of each policy with care before you select one.
The Why of Cyber Insurance
Just 10 or 15 years ago, the idea of investing in cyber insurance would have seemed far-fetched, even unnecessary. Although larger online companies and healthcare organizations certainly sought protection through E&O policies, small and medium-sized businesses didn’t see a need. Today, they do.
Any business that stores or processes confidential information or personal identification data like names, addresses, medical records, Social Security numbers, credit card information or bank account numbers will need cyber insurance. Businesses that should consider cyber insurance include: retailers, financial firms, healthcare organizations, real estate agents, financial firms, restaurants and consultants.
It’s also vital to evaluate third-party business partners and service providers with whom your company chooses to align. Any IT service or accountant, for example, should have its own cyber policy. Always ask for proof prior to hiring.
How to Find the Right Cyber Insurance Policy
As the need for cyber insurance has grown, so have the number of insurance providers who offer competitive policies. This makes it even more crucial to vet your options carefully and choose the best policy for your needs. Here are some suggestions:
1. Identify Your Needs
Start by creating a cyber risk profile for your operation so you know the various risks you might face (and which ones are more essential than others). With that in mind, you can search for cyber insurance policies that fit your specific needs.
2. Understand Requirements
Various cyber insurance policies require stringent measurements and a display of your organization’s security policy in order to provide coverage. Examples of measures vary from presenting current security certifications and adherence to specific standards, to continuously monitoring your networks, digital perimeter and even vendors for cyber gaps.
3. Get Multiple Quotes
The cyber insurance space is highly competitive these days. Try to get multiple quotes from a range of providers. Don’t automatically go with an insurance carrier you already work with, just because they might offer to bundle it with your other policies. Bundling can often be cost-effective, but you won’t know unless you get competing quotes.
4. Read the Fine Print
When evaluating different policies, read the fine print and make sure to compare apples to apples. If you don’t understand a specific term or phrase, request clarification. It’s easy to assume you’re getting a good deal when you’re actually comparing two entirely different products.
5. Weigh the Reputation
Many insurance companies can talk a big game, but does your candidate actually pay out claims and protect the businesses it insures when a problem arises? Insurance companies typically have a reputation, so make sure you do a little digging and see what comes up.
6. Evaluate the Cost
Finally, consider the cost. Just as with car insurance, life insurance or standard business insurance, quotes will come in across a spectrum. Evaluate the long-term costs and weigh them against short-term ones. Which policy makes the most sense for your firm?
Panorays: Your Proactive Partner in Security
Cybersecurity is a multifaceted affair in today’s hostile marketplace. Not only do you need cyber insurance coverage, but you also require attestation of your cyber policies and practices.
With Panorays, you can attest the cyber posture of your supply chain to keep up with your cyber insurance requirements. Our solution eliminates the manual questionnaire process, continually monitors changes to the supplier’s security once you’ve started working together and checks for compliance with regulations like GDPR, CCPA, and NYDFS.
For more information on how the Panorays automated third-party security lifecycle management platform can help you, please contact us today. We’d be happy to provide you with a complimentary demo!