What Should Business Leaders Understand About Cyber Insurance?
It seems that every newscast brings a new story about the latest cyberthreat. Whether it’s an individual being scammed or a business, the threats continue to grow in sophistication and scope every day. As artificial intelligence grows in popularity, the threat is evolving and taking on new life.
The threat is now universal, no matter the size of your business or the industry in which you do business.
Enter cyber insurance. It’s a hot topic judging by the number of internet searches it generates.
Not sure where to begin? Don’t worry. We’ve got you covered.
In this article, you’ll learn five vital pieces of information that every business leader needs to know about cyber insurance.
While Kelser is a managed IT services provider, we aren’t writing this article so that you’ll work with us. We know it’s a different approach, but to us it’s more important that we provide honest, easy-to-understand information that you can use to find the right technology solutions for your business.
Would we like to do business with you? Sure, if we are the right fit to work together. But, we don’t pretend to have the perfect solution for everyone. The truth is, we can’t possibly know if we are the right fit to work together until we have a conversation and learn about your business and your goals.
In the meantime, we’ll continue to publish informative articles like this one about topical technical topics.
What Is Cyber Insurance?
Cyber (also known as “data breach” or “privacy”) insurance policies provide coverage options that cover specific losses from data breaches and other cybersecurity issues that result from electronic activities including email, video conferencing, data collection and storage, and more.
Why Is Cyber Insurance Important?
Large, multinational corporations used to be the prime target of cyber attacks and ransomware. These organizations invested significant financial resources shore up their cyber defenses.
As a result, cyber criminals turned their attention to small and medium-sized businesses that often have the same types of sensitive information, but lack the resources to invest in security.
Today, any organization that conducts business online is at risk of a cyber attack.
What Should Business Leaders Know About Cyber Insurance?
Cyber insurance offers a lot of options and there is vital information business leaders need to know upfront.
1. Cyber Insurance Is Not Perfect
Cyber insurance is one way to minimize the impact of a cyber or other disaster and it provides an extra layer of protection, but it isn’t a guarantee that your business will easily recover or that all of your costs will be covered.
Cyber liability insurance should be viewed as one layer of a comprehensive cyber protection effort that includes up-to-date security solutions like firewalls, multi-factor authentication (MFA), and updated devices and software.
Related article: 5 Ways Businesses Benefit From Cyber Insurance
2. You’ll Need Certain Cyber Tools In Place To Qualify For Cyber Insurance
Before you even think about applying for cyber insurance, you’ll want to evaluate your current level of cybersecurity. Use this checklist to understand where your current cybersecurity approach may be lacking and learn five steps you can take today to strengthen your stance.
Or, read this article to learn five common business IT security solutions required for most cyber insurance policies.
Related article: 9 Common Questions Cyber Insurance Providers Ask
3. What’s Covered By Cyber Insurance?
There are different types of cyber insurance policies.
Third-Party Liability Claims Insurance
These policies typically protect companies from costs associated with data breaches such as notifying affected customers and providing credit monitoring services.
They also protect against claims filed against a company due to cyber events that disclose sensitive data due to a stolen device or data breach.
These policies may also cover the cost of government fines and penalties imposed following a cyber event or violation of privacy regulations. Companies that process credit card payments may be protected from fines, penalties, and investigation costs resulting from a breach.
Claims filed due to the release or display of material on websites or distributed via other media outlets also may be covered, including costs associated with copyright infringement, slander, libel, and defamation.
First-Party Liability Claims Insurance
First-party claims include costs due to physical or structural (i.e. infrastructure) damage.
The coverage may include costs suffered as a result of a cyberattack.
These costs could include: expenses or payments made in response to cyber extortion or a ransomware attack, costs incurred to restore systems to previous levels of functionality, and reimbursement of lost income and expenses incurred as a result of business interruption or slowdown.
It also may cover expenses a business incurs as a result of a cyber incident suffered by a vendor or supplier, reputational damage from negative publicity about an attack, and other costs incurred as a result of a cyber event including legal fees, computer forensics, and public relations costs.
Ask questions. Make sure you understand the details. There is no such thing as a dumb question.
4. What’s Not Covered By Cyber Insurance?
Every policy is different. Make sure you understand what is not covered so there are no surprises when disaster hits. Again, there is no such thing as a dumb question.
5. How Much Does Cyber Liability Insurance Cost?
The cost of cyber liability insurance coverage can vary from business to business. Some of the variables that affect cost are the size of the organization and the industry the business is in.
In general, small businesses can expect to pay a few hundred dollars annually for a nominal amount of cyber liability coverage (both third- and first-party) with a limit of $50,000.
According to online estimates, medium- to large-sized businesses (depending on industry) can expect to pay somewhere between a couple of thousand to tens of thousands of dollars per year.
Embroker.com, a digital insurance provider, says “A recent study performed by AdvisorSmith Solution Inc. found that the average cost of a cyber liability policy in 2019 was $1,500 per year for $1 million in coverage, with a $10,000 deductible.”
Costs for cyber liability premiums will likely increase with rising cybercrime rates and growing contractual requirements for the coverage.
What’s The Bottom Line?
After reading this article, you now have five pieces of important information about cyber liability insurance.
You know that it is one part of a comprehensive cybersecurity solution, some of the security tools commonly required to qualify for cyber liability insurance, and the different types of policies and what they cover. You also know the importance of finding out what’s not covered, and how much you can expect to pay for coverage.
At this point, you may or may not be ready to sign up for cyber insurance.
If you aren’t quite ready to dive in, but want to improve your organization’s cybersecurity profile, click on the button below for a free e-book that explains 10 actions you can take now to defend against the latest cyber threats.
This short, easy-to-understand document, will provide concrete steps you can take to keep your organization safe from unauthorized access, shore up your defenses, and reduce your risk of being the next victim of a cyberattack. Among other things, you’ll learn the importance of:
✔️Updating applications and operating systems
✔️Maintaining current backups
✔️Implementing multi-factor authentication (MFA)
✔️Password protecting mobile devices