Cyber insurance

What is Cyber Insurance?

Most companies have a variety of different insurance policies designed to provide protection against certain threats. However, many standard insurance policies don’t provide protection against cyberattacks and threats to digital assets.

Cybersecurity insurance policies provide coverage specifically against common cyber threats, such as data breaches and malware infections. They can help to offset the costs of remediating the incident such as incident response, digital forensics, and notifying and compensating customers and affected parties.

Why Do Companies Need Cyber Insurance?

Cyberattacks are a significant and growing threat to companies’ abilities to operate. Data breaches, ransomware attacks, and similar threats commonly cost companies millions of dollars to remediate. Distributed denial-of-service (DDoS) attacks can cause lost sales and long-term damage to brand image.

These threats are growing more common and dangerous as cybercriminals become more sophisticated and advanced tools become available to less-skilled attackers. As a result, most businesses can expect to be targeted by multiple attacks per year.

Companies have various forms of managing their cyber risk exposure. For example, an organization can put defenses in place to mitigate a potential threat or try to avoid certain activities that are more risky.

However, some cyber risk is unavoidable, and companies need a plan for managing the costs of any resulting security incidents. The organization can either choose to accept the risks and potential costs or transfer them to an insurance provider by taking out a policy.

How Does Cyber Insurance Work?

Cyber insurance works like any other insurance policy. The organization will apply for insurance and will purchase a policy with a given monthly fee, deductible, and list of covered events.

One of the main downsides of cyber insurance policies is that they are growing more difficult to obtain and may not cover all potential cyber threats. For example, the growth of ransomware attacks in recent years and their high price tags have resulted in some providers no longer offering insurance for ransomware-related attacks.

Additionally, an insurer may have stricter requirements to obtain or maintain a cyber insurance policy. For example, an organization may need to be able to demonstrate that it has certain cybersecurity controls in place to be eligible for a policy.

Benefits of Cyber Insurance

A cybersecurity insurance policy can have a few different benefits for an organization, such as:

• Reduced Financial Risk: With cyber insurance, the insurance provider is responsible for some of the costs of a cyberattack. This reduces the risk that a major attack will put a company out of business.
• Access to Professional Support: Some insurance providers have relationships with professional incident response teams. This can help an organization to more quickly recover from a cyberattack, reducing the impact on the business.
• Additional Services: An insurance provider may offer certain services to help an organization manage the aftereffects of an incident. For example, they may provide strategic guidance or help in notifying customers.

Conclusion

Cyberattacks pose a significant threat to organizations’ abilities to operate, and it is not uncommon for a company to shut down after a significant cyberattack. Cybersecurity insurance provides some protection against this, but its limitations means that it’s not a perfect solution.