What Is Cyber Insurance?
Data breaches cost organizations billions every year and cyber insurance allows organizations to off-load the residual risk-related reliability and costs associated with cybersecurity events. Cyber insurance (also known as cyber-liability insurance) minimizes the costs of a cybersecurity event such as ransomware, data breach or network compromise so that businesses do not suffer from severe financial strain.
Who Needs Cyber Insurance?
Any business that hosts or stores sensitive information can benefit from cyber insurance. The more risk they face, the more important it is for organizations to buy cyber insurance policies to reduce costs from a data breach or disruptive cyber attack. Should a threat lead to data theft, the organization must pay for incident response, remediation, brand damage, litigation, compliance fines and potential customer reparations. Cyber insurance helps cover some of this cost.
Data loss and destruction, especially in the case of ransomware. are also risks from a compromise. Cyber insurance policies cover fallout costs from these cybersecurity incidents. For example, ransomware is a crippling event that could take weeks to remediate using disaster recovery. A cyber insurance policy covers some of these costs.
What Attacks Result in Cyber Insurance Claims?
After a cybersecurity incident, the organization must cover costs for subsequent remediation actions. These include:
- Incident response
- Forensics and investigations
- Compliance audits
- New security infrastructure and policy changes
Any cyber event that results in data loss, investigations and cost-related consequences could be covered in an insurance policy. But coverage depends on the cyber insurance company and the type of coverage the organization chooses. The type of coverage determines policy premiums, so cost is often a factor in the organization’s policy choice. Most policies cover costs associated with credential theft, phishing, ransomware, malware and insider threats.
Why General Insurance Liability Won’t Cover Cyber Crimes
For many insurance policies, cybersecurity events are explicitly excluded in coverage. General insurance liability typically excludes cyber attacks and other digital data theft. That means organizations usually must buy cyber insurance separately. (Every business should check their policy for their specific coverage.)
Just one cybersecurity incident can cost tens of thousands of dollars, making it too costly for insurers to cover in general liability policies. Also, the volume of risks is a large factor in insurance premiums. That makes actuarial calculations difficult, especially as organizations grow and add more infrastructure to their environment.
What Does Cyber Insurance Cost?
Because every corporation has their own set of risks and coverage preferences, the cost of cyber insurance is never a “one size fits all” structure. Size of the business and annual revenue are also factors that affect insurance premiums. Industries such as health and finance are major targets, so this factor might also influence coverage and costs.
Just like general insurance, past events also affect cost of coverage. If an organization has fell victim to a cyber attack before, premiums and deductibles will likely be higher than an organization that successfully defends against threats.
What Does Cyber Insurance Cover?
Costs depend on several factors, including the organization’s chosen coverage. As business owners shop around for coverage, every insurance company offers its own packages and policies. Insurance agents will send quotes for coverage options with different costs and a business owner can choose from a list of policies.
Generally, cyber insurance covers:
- Loss of data and associated recovery.
- Loss of revenue due to business interruptions from a cybersecurity event.
- Loss of transferred funds from events such as fraud and social engineering.
- Loss of funds from computer fraud and extortion.
The above list covers the actual cyber-event. Many insurance policies also cover the aftermath and follow-up events associated with a data breach.
After suffering from a data breach, a cyber insurance policy will likely cover:
- Notification costs. Costs associated with identifying victims and sending notices so that they are aware of the breach. This is often a compliance mandate.
- Credit monitoring. Costs associated with victim (customer) credit monitoring after data loss and identity theft.
- Civil litigation. Costs associated with lawsuits and reimbursing affected customers.
- Forensics. Costs to hire consultants and forensics experts so that damage and the root causes can be analyzed.
- Brand damage. Costs associated with public relations to repair damage to the organization’s reputation.
Organizations should check with the insurance company for cost coverage to help stop attacks before they happen. An insurance company might help with prevention training against phishing and social engineering.
What Does Cyber Insurance Not Cover?
Organizations buy cyber insurance policies to cover monetary loss during a cybersecurity event. But policies don’t cover everything. For example, a cyber insurance policy does not cover projected future revenue loss. Any intellectual property loss from a data breach must be covered under another tailored policy.
Acts of war from foreign attackers are not usually covered. And any costs associated with building cybersecurity infrastructure before and after the breach might not be covered. As usual, check with the insurance company and the policy to find any exclusions to coverage.
Does Cyber Insurance Include a Deductible?
Just like any other insurance policy, cyber insurance has a deductible, but you can choose the deductible when the policy is written. Insurance companies will give organizations a deductible choice and the deductible price will determine the insurance premiums. The lower the deductible, the more an organization will pay for their premiums.
Why isn’t Cyber Insurance Meant to Replace a Security Strategy?
It might seem like cyber insurance is the magic bullet for a data breach. But it should be used only as a supplemental addition to your cybersecurity strategy—never the entire strategy. It’s important to read the cyber insurance policy to ensure that all terms and conditions are met, including a plan that covers infrastructure necessary to protect data.
A data breach is expensive. Cyber insurance does not cover future revenue from newly released products and business growth. This lost revenue from brand damage and costs associated with a data breach can permanently dampen future revenue. For an organization to sustain, it must have a cybersecurity strategy that helps reduce risk and avoid a compromise.
Coverage on Cybersecurity Events
In 2017, several major cybersecurity events destroyed data for large organizations and government entities across the globe. WannaCry, Petya and NotPetya were a few of the ransomware attacks affecting small and large organizations. It would seem like cyber insurance would cover the damage from these ransomware attacks. But forensics experts suggested that the attacks could be targeting specific countries.
As mentioned above, “acts of war” are not covered in most cyber insurance policies. After numerous ransomware attacks in 2017, some insurance companies claimed that they did not need to pay for ransomware damage because it was considered an act of war. This left several organizations left to cover the expenses after ransomware damage—one of today’s most expensive attacks.
What Do You Need to Acquire a Cyber Insurance Policy?
The first step towards acquiring cyber insurance is to audit your infrastructure and document your cybersecurity policies and systems. To determine coverage and costs, a cyber insurance company will want to know what cyber defenses are in place. As with any insurance company, a cyber insurance company will not cover an organization with no cybersecurity strategy and infrastructure in place. Such an organization is sure to be a victim of a data breach, if not multiple breaches.
After an audit of cybersecurity infrastructure, it’s time to shop for a policy by contacting various insurance companies. Every company will have their own policy standards, exceptions and costs. So ensure that you read the policy terms and conditions before agreeing to a policy. An insurance company will review current cybersecurity strategies to determine your level of risk and decide whether they are willing to write a policy for you.
What is the Future of Cyber Insurance?
Cybersecurity events cost organizations billions every year. The costs of a single event—including containing, remediating, investigating and covering monetary loss from brand damage and compliance violations—can run well into six figures. As more organizations realize the huge cost associated with a cybersecurity event and data breach, they will want to pay for policies that cover the damages and monetary loss from these events.
Insurance companies always tailor their policies so that they make money on premiums. That means you should always be aware of the exclusions written into the contract. Large payouts are expensive to insurance providers. For that reason, they add limitations to ensure that coverage involves incidents only where the organization put necessary cyber defenses in place and did all they could to stop a compromise.
Insurance providers are more hesitant to write policies for organizations with poor cybersecurity controls. Therefore, you must put specific strategies and infrastructure in place before shopping around for a provider. Better cybersecurity controls will also reduce risk—and therefore reduce insurance premiums and costs for coverage. Before shopping for a policy, an organization can lower premium payments by installing effective cybersecurity infrastructure across their environment.
Cyber insurance generally covers your business' liability for a data breach involving sensitive customer information, such as Social Security numbers, credit card numbers, account numbers, driver's license numbers and health records.What are the 4 categories of cyber and privacy insurance? ›
Cyber insurance generally provides protection against four distinct types of risk: privacy, security, operational and service risk.What is cyber risk coverage? ›
What is cyber risk insurance? Cyber risk insurance protects an organization from security & privacy events by covering the cost to recover from a data breach, virus, or other form of malicious cybersecurity activity.What are the key components of a cyber insurance policy? ›
Generally, cyber insurance is designed to protect your company from these primary risks through four distinct insuring agreements: Network security and privacy liability. Network business interruption. Media liability.What does cyber insurance does not cover? ›
While some cyber insurance policies contain specific provisions for E&O, most providers sell these as separate and distinct policies. E&O insurance does not cover the loss of third-party data, such as customer credit card numbers; customers needing such protection can purchase a cyber insurance policy that covers it.What does cyber insurance typically not cover? ›
Generally, a cybersecurity insurance policy doesn't cover the following: Costs for improving your internal technology systems following a cyber event. Loss of value caused by the theft of intellectual property from your company. Potential lost profits in the future.What are the 7 types of cyber security? ›
- Network Security. Most attacks occur over the network, and network security solutions are designed to identify and block these attacks. ...
- Cloud Security. ...
- Endpoint Security. ...
- Mobile Security. ...
- IoT Security. ...
- Application Security. ...
- Zero Trust.
The 3 major types of cyber security are network security, cloud security, and physical security. Your operating systems and network architecture make up your network security. It can include network protocols, firewalls, wireless access points, hosts, and servers.What are the 3 main pillars of cyber security? ›
When we discuss data and information, we must consider the CIA triad. The CIA triad refers to an information security model made up of the three main components: confidentiality, integrity and availability.What type of coverage is cyber liability? ›
Cyber liability insurance is an insurance policy that provides businesses with a combination of coverage options to help protect the company from data breaches and other cyber security issues. It's not a question of if your organization will suffer a breach, but when.
Cyber liability insurance coverage is important for any size business to have. At a minimum, cyber liability insurance helps companies comply with state regulations that require a business to notify customers of a data breach involving personally identifiable information.What is personal cyber coverage? ›
A personal cyber insurance policy reimburses individuals for payments they made under the duress of an extortion threat. It may also cover the costs of conducting an investigation to diagnose the cause of the event and help prevent such an occurrence in the future.Who is responsible for cyber insurance? ›
More specifically, the Cybersecurity and Infrastructure Security Agency (CISA) defends US infrastructure against cyber threats. As a part of the Department of Homeland Security, CISA is responsible for protecting federal networks and critical infrastructure from attacks.What is first party coverage in cyber insurance? ›
What is First-Party Coverage? A First-Party Coverage claim is one the policyholder brings against their own policy. For example: A policyholder suffers a data breach and must outsource an IT forensic team to locate the breach's source, re-secure their network, and confirm what information was potentially compromised.Does cyber insurance have a deductible? ›
Does Cyber Insurance Have a Deductible? Yes. Like traditional insurance policies, cyber insurance also includes a deductible. This refers to the amount the company must pay out of pocket after a cybersecurity incident before the insurer will cover the costs.What should I ask cyber insurance? ›
- What Is The Cost? ...
- What Incidents Will The Insurance Cover? ...
- Is The Provider Knowledgeable About Your Businesses Industry? ...
- Are There Specific Incidents That Are Excluded? ...
- Which Audit Or Compliance Obligations Will You Need To Comply With?
The five C's of cyber security are five areas that are of significant importance to all organizations. They are change, compliance, cost, continuity, and coverage. The top priority of organizations all over is having security protective of their digital and physical assets.What are the 5 main threats to cyber security? ›
- Social engineering attacks (or phishing) ...
- Ransomware. ...
- Mobile security attacks. ...
- Remote working risks. ...
- Identity-based cloud security threats.
Cyber security is the application of technologies, processes, and controls to protect systems, networks, programs, devices and data from cyber attacks. It aims to reduce the risk of cyber attacks and protect against the unauthorised exploitation of systems, networks, and technologies.What are the 10 common types of cyber threats? ›
- Man-in-the-Middle (MitM) Attacks.
- Denial-of-Service (DOS) Attack.
- SQL Injections.
- Zero-day Exploit.
- Password Attack.
- Cross-site Scripting.
When a network is secured, potential threats gets blocked from entering or spreading on that network. Examples of Network Security includes Antivirus and Antispyware programs, Firewall that block unauthorized access to a network and VPNs (Virtual Private Networks) used for secure remote access.What is the 10 Steps to cyber security? ›
- Risk management regime. ...
- Secure configuration. ...
- Network security. ...
- Managing user privileges. ...
- User education and awareness. ...
- Incident management. ...
- Malware prevention. ...
Third-party cyber liability insurance provides liability protection for companies that fail to prevent a data breach or cyberattack at a client's business. This policy covers the legal costs of a cyber liability lawsuit, including any settlements or judgments.Is cyber insurance mandatory? ›
Because many companies rely on their computers to accomplish vital business tasks, they must obtain cyber insurance. Without cybersecurity insurance, a company may be compelled to pay major losses with its own funds or rely on other forms of insurance plans, which may not be adequate.What is cyber insurance and why is IT important? ›
Cyber insurance is a policy with an insurance carrier to mitigate a businesses' financial risk exposure by offsetting costs related to damages and recovery after a data breach, ransomware attack, or another cybersecurity incident.Is cyber insurance a good idea? ›
The Cyber Security Breaches Survey 2022 found that while 43% of businesses have cyber insurance, only 6% adhere to Cyber Essentials and 8% to ISO 27001. There is little benefit to obtaining cyber insurance if you don't also invest in your information security defences.Do I really need cyber insurance? ›
All Businesses Need Cyber Liability Insurance
Small businesses are often very cost-conscious, investing into their company, their employees and their products. While they focus on growing their business and generating revenue, they can overlook a critical component to long-term success – cyber security.
If your business deals with sensitive customer data, does a lot of business over the internet, and doesn't have cover from any external cybersecurity providers, cyber insurance is worth investigating. Businesses with good anti-virus software, or businesses that are small-scale, often think they're at less risk.What are the benefits of cyber insurance? ›
Coverages provided by cyber-insurance policies may include first-party coverage against losses such as data destruction, extortion, theft, hacking, and denial of service attacks; liability coverage indemnifying companies for losses to others caused, for example, by errors and omissions, failure to safeguard data, or ...Is cost of new computer is covered under cyber insurance? ›
First-party coverage typically covers the following:
Computer and data loss replacement or restoration costs – Desk and laptop computers, servers, and data can be damaged as a result of a hacker's activities.
What is the average cost of cyber insurance? The average annual premium for personal cyber insurance is between $300 and $1,200, depending on the level of coverage and the specific deductible you choose. The average cost of cyber insurance for a business is between $500 and $5,000 per year.What should I look for in cyber security insurance? ›
- Data breaches (like incidents involving theft of personal information) ...
- Defend you in a lawsuit or regulatory investigation (look for “duty to defend” wording) ...
- Legal counsel to determine your notiﬁcation and regulatory obligations. ...
- Payments to consumers aﬀected by the breach.
A forensic examination by a reputable firm can cost anywhere from $10K to over 100K, according to SecurityMetrics. Your cost will depend on a number of factors, including the size and number of locations of your small business.What are the 3 importance of cyber security? ›
Cybersecurity is the protection to defend internet-connected devices and services from malicious attacks by hackers, spammers, and cybercriminals. The practice is used by companies to protect against phishing schemes, ransomware attacks, identity theft, data breaches, and financial losses.