Safeguarding Business Interests: The Importance of Cyber Insurance
Over the last few years, cyber-attacks against businesses have skyrocketed. There were over 493 million ransomware attacks in 2022 alone—and that is an improvement over the previous year. This reality has placed cybersecurity at the heart of risk management for businesses large and small. That is not surprising since an estimated 60% of businesses who suffer a cyberattack or data breach go bankrupt, out of business, or both within six months of the incident.
However, cyber defense is only one part of an intelligent digital risk management plan. It is also important to plan for what would happen if the business falls prey to an attack, as well as how to respond and recover from the incident. That is where cyber insurance enters the picture. It offers a critical safety blanket that can provide a lifeline to cover costs and clean up the mess left in the wake of an attack. Here is some information on what cyber insurance is, how it works, and why it is rapidly turning into a must-have for businesses all over the globe.
What Is Cyber Insurance?
Cyber insurance is exactly what it sounds like. It is a type of liability insurance that protects a covered business from the financial fallout stemming from a cybersecurity incident. It exists because most, if not all, general business liability policies do not extend to losses incurred as a result of a ransomware attack, a data breach, or any other kind of digital intrusion or theft. That is a big reason why so many businesses fail in the wake of a cybersecurity incident as they turn to their insurers, only to find out that their existing coverage does not apply to their situation.
What Does Cyber Insurance Cover?
Like all other types of insurance policies, cyber insurance coverage will vary based on the circumstances, needs, and budget of the business. However, most comprehensive cyber insurance policies cover some or all of the following:
- Costs related to notifying customers about a data breach or attack
- Reimbursing customers for losses related to identity theft
- Costs connected to data recovery
- Replacement or repair of affected hardware and infrastructure
- Forensic investigation costs
- Regulatory fees, fines, and expenses
- Loss of revenue
Cyber insurance can also help businesses cover costs associated with repairing reputational damage stemming from a cybersecurity incident. It is those costs that are often the most difficult to quantify and therefore represent a major source of post-incident business risk. With the right insurance in place, however, the odds of a business not only surviving—but thriving—in the wake of a cyberattack increases dramatically.
How Cyber Insurance Impacts Cybersecurity
Businesses should also recognize that cyber insurance does not just protect them in the aftermath of an attack, but it also helps them improve their defensive measures beforehand. The reason for that is simple. Cyber insurance policies come with a minimum set of cybersecurity requirements, which forces businesses to improve their cybersecurity.
Beyond that, cyber insurance policy underwriters frequently offer businesses discounts for implementing cybersecurity countermeasures, like intrusion detection systems, endpoint protection software, high-security firewalls, and encryption. In many cases, this gives already-prepared businesses an even greater incentive to sign up for a cyber insurance policy since the security they already have in place helps decrease their policy costs without the need for any further investments.
Businesses can also work on their cybersecurity measures before signing up for a policy to improve the odds of getting an affordable quote. They can do this by adding the following to their cybersecurity repertoire:
- Ongoing risk assessments and audits
- Centralized patch management capabilities
- Secure online or offsite data backups
- Regular penetration testing and mitigation
- Comprehensive incident response plans and capabilities
- Thorough and effective employee cybersecurity education
- Exceeding any preexisting compliance requirements
- Having experienced cybersecurity experts in-house or available via contract
In other words, businesses can use the requirements list of the average cyber insurance policy as well as the measures insurers view favorably as a handy guide to building a high-quality cyber defense. After all, insurers know what factors reduce cyber risk because their bottom lines depend on it, too.
Cyber insurance policies may also come with some value-added services which can further business cybersecurity goals. These may include pre-policy cybersecurity assessments, pre-loss risk mitigation tools and services, and access to incident response platforms. For the insurers, this helps make covered businesses less of a risk, and for the businesses, it serves as an instant cybersecurity upgrade.
Cyber Insurance and Resilience
Cyber insurance is also a necessary component of a comprehensive cyber resilience plan. It helps businesses to answer some of the most critical questions surrounding their recovery plans. Specifically, it provides baseline funding levels to guide recovery plans. In effect, it lets businesses know in advance what they can afford to do to get back up and running in the wake of an attack. It also lets them know what support resources they will have access to should the need arise. These are all questions that businesses might not otherwise have ready answers to—unless they are among the lucky few that weathered a cybersecurity incident without cyber insurance and lived to tell the tale.
Cybersecurity Planning and Expertise
Aside from helping businesses to upgrade and manage their cybersecurity, at Outsource IT we also help our clients to find and procure cyber insurance via our strategic insurance industry partnerships. That includes offering consulting services to help businesses prepare their systems and cybersecurity measures in advance of getting a policy, as well as in maintaining compliance afterward to satisfy policy requirements. Our experts know and understand the intricacies of cyber insurance policies and can provide valuable expertise and assistance to businesses navigating their options for the first time. To learn more, simply contact one of our knowledgeable account managers and ask how Outsource IT can be a cyber insurance ally to your business.