According to the Check Point Research (CPR) 2021 Cyberattacks report, there has been an upwards trend in the number of cyberattacks. This trend reached an all-time high at the end of the year, peaking at 925 cyberattacks a week per organization, globally.
At this point, it’s no longer just tech companies, banks, and credit unions that need cybersecurity insurance—it’s all businesses of all sizes across all industries. The CPR report noted that in 2021, education/research was the sector that experienced the highest volume of attacks, with an average of 1,605 attacks per organization every week. This was a 75% increase from 2020.
This was followed by the government/military sector, which had 1,136 attacks per week (47% increase), and the communications industry had 1,079 attacks weekly per organization (51% increase).
With the prevalence of cyberattacks and data breaches, it’s natural to wonder whether or not you should have cybersecurity insurance to protect your business from liability. But even with the risks of hacking, data breaches, and liability cases surrounding computer fraud, most organizations are still not taking advantage of this form of cyber protection.
Most enterprises wonder if cybersecurity insurance is even worth it. However, cybersecurity insurance is increasingly more important in today’s world of identity theft, viruses, and breaches.
What is Cybersecurity Insurance?
Cybersecurity insurance or cyber liability insurance is a type of insurance that protects against losses caused by cyberattacks. Cyber insurers provide multiple types of coverage, including first-party, third-party, and cyber extortion. Some cyber insurance companies offer supplemental add-ons such as crime policies, which covers workplace theft, and device cover, which protects cell phones.
You can also get cybersecurity insurance for software or hardware products you’ve developed; although in these cases, you would need software/product liability insurance instead. Policies also differ in terms of who they’re written for—some are designed for small and medium businesses (SMBs), others for mid-size businesses, and still others for large enterprises.
Additionally, it’s worth noting that cyber insurance isn’t mandatory; most plans include optional coverage extensions, so you can buy more if needed. Your annual cyber insurance premium should be based on several factors, including how vulnerable your business is to cyber risks. If you’re looking to purchase cyber liability insurance, make sure it’s tailored for your industry and ask about additional policy options like product/device protection and D&O (directors & officers) protection.
Also read: Emerging Cybersecurity Trends in 2022 and Beyond
How Does Cybersecurity Insurance Work?
Cyber insurance helps enterprises minimize cyber liability and mitigate risks associated with malicious threats and data breaches. It covers digital extortion, viruses and malware attacks, privacy breaches, denial-of-service (DoS) attacks, and website hacks. The cost of cyber insurance is pretty low, considering its benefits. Therefore, most medium to large businesses opt for cybersecurity insurance for security’s sake.
How to buy cyber insurance?
Many companies that provide E&O (errors and omissions) insurance, commercial liability insurance, and commercial property insurance also offer cyber insurance coverage.
Which Businesses Need Cybersecurity Insurance?
Enterprises need cybersecurity insurance if they have a significant investment in information technology or regularly transmit sensitive data, such as credit card numbers. Any business with a significant investment in IT infrastructure—including hardware, software, and support services—should consider investing in cyber insurance.
Another reason to get cybersecurity insurance is if your company regularly handles private or confidential information on customers, employees, and business partners. Suppose you hold or process financial, healthcare, consumer, or other personal information in electronic form via computer systems and networks (even those used for email). In that case, you might want cyber security insurance.
If a breach were to occur—and fall into one of these categories—you’d want it covered by an outside party rather than by your budget. Businesses that rely heavily on their IT systems for operations should also purchase cybersecurity insurance since any downtime could cost them money without losing any customer data.
What does cyber security insurance cover?
- Third-party indemnification: In third-party indemnification, if a hacker steals your data or malware infects your network and damages other entities, then your insurer would pay those victims on your behalf.
- Data breach notification: With data breach notification, as soon as you learn there has been a compromise of sensitive customer information, such credit card numbers, social security numbers, personal health information, and so forth, you notify everyone involved immediately, including customers who might get hit with identity theft, banks who can freeze accounts, and government agencies if it is related to medical records.
- Network security audit coverage: Addresses software vulnerabilities found during an audit, including patching and updating systems that hackers could exploit.
- Defense costs: If a hacker attacks your website or network for nefarious purposes like ransomware, then an insurance policy will help cover recovery expenses after said attack.
- Remediation assistance: This item covers all legal fees associated with responding to threats and recovering lost funds as well as any reputational damage incurred because of poor security practices.
- Credit monitoring: They also provide credit monitoring services in case compromised data makes its way into underground markets like the dark web.
- Breach containment: Another benefit of some providers is breach containment which helps limit the damage by quarantining affected computers and locking them down to prevent further intrusions.
Also read: Security-First UX: Experiencing The Digital World Safely
Benefits of Cybersecurity Insurance
As more organizations experience damaging attacks and cyber insurance becomes a commonplace offering, many wonder whether they should purchase it. Here are four key benefits of cybersecurity insurance.
- Cybersecurity insurance will help cover your legal expenses. If your company suffers damages due to a cyberattack, then cyber insurance will likely cover any legal costs incurred by both your company and its employees.
- Cybersecurity insurance can be used for crisis management in cases where a cyberattack has caused an organization significant harm. Crisis management services can help ensure things don’t deteriorate further.
- Cyber insurance covers regulatory fines and penalties when an attack results in a financial loss.
- Cyber insurance offers key coverage gaps not covered by general liability policy, such as damage caused by viruses, ransomware, and similar cyber threats.
Cyber insurance should be part of your business continuity strategy. Having cyber insurance means you’ll be able to recover quickly after an incident while also saving money since you won’t have to pay for costly business interruption services.
Disadvantage of Cyber Liability Insurance
Cybersecurity insurance is an added expense that most SMBs can’t afford because the cyber liability coverages add a level of overhead to their business. They are not a substitute for solid cybersecurity measures as they only cover what you already have set up. Moreover, cybersecurity insurance does not cover property damage and intellectual property and the cost of protective security measures.
Should Enterprise Buy Cyber Liability Insurance?
Yes. Considering how much digital content your business relies on, cybercrime is a genuine concern. Security is a top priority of any organization, and it’s costly to maintain. A cybersecurity insurance policy could be just what you need to guard against cybercrime, from data breaches to attacks on websites.
If your company gets hacked, paying for restoration efforts or backup services out of pocket can be expensive—it’s usually cheaper to buy an insurance policy. Additionally, while a standard business liability policy might not protect against losses due to data breaches, many cybersecurity policies do provide that kind of coverage.
Many businesses depend on their computer systems to perform critical business functions, so they must have some kind of cyber insurance policy. Without a cybersecurity insurance policy, a business can be forced to cover significant losses with its capital or rely on other types of insurance policies, which might not provide enough coverage.
That’s why many companies invest in a cybersecurity insurance policy to ensure that any losses from security breaches are covered by an outside party and limit their financial exposure.