Devin Partida writes about cyber security and technology. She is also the Editor-in-Chief of ReHack.com.
Anyone tuned into the cyber security world understands that new threats emerge almost daily. Unprotected organizations are constantly threatened by cyber attacks; from DDoS attacks, to phishing scams, to business email compromises. Even companies that heavily prioritize security must continuously reevaluate their processes to ensure they always remain protected.
In recent years, new options have emerged for companies to protect their assets when cyber attacks occur. One of these options is cyber insurance. Here’s why organizations should consider it as part of their security stacks.
What is cyber insurance?
Like other forms of insurance, cyber insurance protects businesses against losses related to cyber security incidents, such as:
- Stolen backups
- Data breaches
- Disrupted daily operations
- Network damage
- Reputational harm
These insurance policies help organizations manage the costs associated with data loss, legal fees and other expenses in the aftermath of a breach. When combined with proper cyber security measures, cyber insurance can give companies confidence that they are protected financially even if something happens.
The benefits of cyber insurance
Around 83% of businesses had cyber insurance as of 2021. This is for a good reason — research shows that cyber attacks happen an average of 2,244 times daily. Practices like securing networks, training staff and updating software can prevent cyber security issues, but hacks can be devastating. With cyber insurance, that loss is mitigated.
Here are several benefits of cyber insurance:
- Recover lost data: A cyber insurance plan covers the costs required to recover any data lost during the attack, such as stolen documents or content.
- Pay data extortion lawsuit fees: A company that’s the victim of a ransomware attack can rely on its insurance policy to pay related lawsuit fees.
- Resolve reputational damage: A highly public cyber attack that impacts client and customer data can lead to severe reputational damage for the company involved. A cyber insurance policy can cover the expenses for related lawsuits.
- Cover expenses from regulatory violations: Cyber insurance can protect organizations from related costs if a cyber attack violates the guidance of a regulatory body.
- Restore customer identities: Cyber attacks can impact clients and customers personally, as the attack exposes their personal information, potentially leading to stolen identities. A cyber insurance policy can help financially in this aspect.
Is cyber insurance worth it?
The decision to invest in cyber insurance is one that companies have to make based on their unique needs. In a general sense, looking at the current state of cyber security would likely lead one to believe that the added protection of an insurance plan is worthwhile. However, organizations should consider a few points before seeking coverage.
- Cyber security practices: The reality is that cyber insurance is not a catch-all for cyber attacks. In other words, getting insured without investing in modern cyber security methods would not be helpful. Therefore, companies should treat this insurance as a supplement to existing protection methods.
- Rising cyber insurance premiums: Policyholders saw their cyber insurance premiums rise by up to 30% at the end of 2020. Those interested in pursuing cyber security insurance for their organizations must understand how this coverage might affect their budgets and whether that expense is worthwhile for what they receive.
- Extent of cyber insurance coverage: Note that cyber insurance will not cover every kind of cyber attack or related issue, such as acts of war. Therefore, organizations should fully understand what a policy entails before they sign the dotted line.
What to do before purchasing cyber insurance
Before getting cyber insurance, businesses should always assess their processes to ensure the coverage is necessary and beneficial for their operations. This means deeply analyzing the potential risks that would contribute to a cyber attack and the impact that incident would create. Then, the company can determine whether the cost of coverage is worth it, in accordance with its findings.
If the assessment reveals the company has numerous glaring weaknesses in its cyber security protection, it should resolve those problems before pursuing insurance. Coverage can be helpful and advantageous, but businesses can avoid the headache and expenses of a cyber intrusion in the first place when they prioritize security measures. They can then be more confident exploring insurance options.
Cyber insurance can help businesses mitigate incident costs
Cyber attacks have become increasingly common and sophisticated. Companies can stay protected financially by pursuing comprehensive cyber insurance plans. Cyber security issues will become less of a burden, giving the organization peace of mind in a somewhat unpredictable landscape.
For more from this author, please see CyberTalk.org’s past coverage. To receive cutting-edge cyber security news, exclusive interviews, high-minded expert analyses and leading security resources, please sign up for the CyberTalk.org newsletter.