Protect your company’s financial assets with an extra layer of protection against residual risk
Cybersecurity is an important undertaking nowadays for businesses of all sizes. The latest statistics from IBM’s annual “Cost of a Data Breach Report” show the average cost associated with a data breach rose from a staggering $3.66 million to an even more mindboggling $4.24 million in the past year. This doesn’t even include the numerous other types of cybersecurity events executed by threat actors on a daily basis. In total, losses are in the multi-billions for businesses.
Few businesses can survive, never mind try to thrive, beyond these types of incredible monetary losses, but in the USA cyber insurance can help your company mitigate and absorb some of the risks associated with cyber events. Historically, many businesses haven’t invested in cyber insurance, but with the rising number of incidents each year, companies are starting to consider these policies to protect themselves. Have you examined your company’s risks and coverage options lately?
Cybersecurity insurance works much like other types of coverage policies and is steadily becoming an essential component of any modern cybersecurity preventative strategy. However, it’s important for businesses, especially small and medium-sized companies, to know the cybersecurity industry is in the midst of big changes. As a result, going forward, it’s going to be increasingly more important for SMBs to thoroughly understand the proactive cybersecurity measures they need to take to become qualified for insurance coverage as industry standards for payouts start to become more stringent.
Cybersecurity insurance is designed to help businesses like yours mitigate losses from the various costly cybersecurity incidents that can occur. In our modern digital age, just about everything is either transmitted, processed, or stored electronically. Loss or exposure of your data is going to be extremely costly, especially as government regulations worldwide expand to become harsher on those companies that haven’t taken adequate or reasonable preventative measures to safeguard data.
In the event a cybersecurity incident occurs, cyber insurance coverage can help pay for expenses associated with the attack, government and industry fines, legal fees, and the costs associated with forensics and/or recovering data, to name a few expenses. Insurance policies can also help your business pay for redress to rectify the problems a cybersecurity event caused affected individuals (e.g.customers and employees) to suffer, such as credit monitoring and ID theft repair.
The cyber insurance industry is currently evolving to become more standardized like other forms of insurance. In general, a comprehensive cyber insurance policy covers three primary categories of financial risks businesses routinely face.
Businesses are smart to integrate a variety of cyber insurance coverage to ensure all potential scenarios are covered. Events such as extortion, dataloss/destruction, fraud, online theft, hacking incidents, malware, social engineering campaigns, and denial of service attacks can easily cripple any business and significantly disrupt its business continuity.
Currently, the cyber insurance market is in the midst of a huge transformation. In the past, this industry was relatively unknown, but now it is a well-known option and the industry has subsequently begun to gain sudden traction. Due to this rapid growth, the industry wasn’t prepared, didn't have the historical data to set accurate premium rates, and, due to the continuing uptick of cyber incidents, payouts quickly exceeded the resources to pay for them. This became a larger issue as the number of ransomware attacks exploded. As a result, the cyber insurance market is going to evolve to become more restrictive about what is and isn’t covered. It’s likely in the future, many small and medium-sized businesses may find they have more difficulty obtaining cyber insurance.
That being said, if your business is more proactive about its cybersecurity practices, such as having a comprehensive cyber risk management program in place, you’ll find it might be easier to qualify for a policy or obtain better insurance coverage premium rates. In the future, as this insurance niche begins to become more standardized, insurance companies are going to want to mitigate their own risks so the number of claims doesn’t exceed what the companies are bringing in through premiums.
A solid cyber insurance policy can help your business mitigate losses that result from a cybersecurity incident. Investing in a policy can not only help your company transfer the residual risk via cyber insurance, but improve your company's overall security posture. The latter is essential to reducing risks, especially as the number of ransomware attacks continues to rise at exponential rates. In 2020, this type of attack increased a whopping 485% over 2019 and the demanded ransom amounts have tripled. Even insurance companies are being targeted by these threat actors, which creates a unique, significant problem in itself.
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Today, cyber insurance coverage should be considered as important as other types of insurance businesses need to invest in. Essentially, all companies should create a cyber insurance coverage checklist to determine the highest risks and what type of coverage is best. When shopping around for insurance, it’s important to know what cyber insurance covers—and, as important, what cyber insurance does not cover. Company decision-makers need to understand not every policy covers each type of claim. For instance, the following are typically excluded from cybersecurity insurance:
To have these events covered, other types of insurance, such as general liability, commercial property, and professional liability insurance should be obtained. As the industry evolves, it’s important for small and medium-sized companies to keep up-to-date with the changes.
Even companies with the best mitigation efforts in place are still likely to suffer an attack. For the most part, nowadays it’s not “if” a cybersecurity attack occurs, it’s “when.” Integrating cyber insurance as part of an overall security strategy will help ensure all proverbial bases are covered. Most cyber incidents are related to humans, be it by an intention to exploit or a result of an employee's accidental exposure of data or giving up credentials to hackers. Protecting yourself can reduce the impact after an event occurs.
Considering the consequences, no business can afford to ignore cybersecurity or cyber insurance options. Turning to an experienced cybersecurity provider can help offset costs and help your company identify the right cyber insurance options that will offer the most comprehensive coverage.