Cybersecurity insurance, also referred to as cyber insurance or cyber liability insurance, is an insurance that a business can buy to reduce risks to their finances linked to being online. A C.I. policy will transfer some risk to the insurance company for a fee.
While many types of insurance have been around for decades, C.I. is pretty new. Businesses that choose to buy cybersecurity insurance are thought of as early adopters. Given how cyber risks fluctuate, cybersecurity policies change frequently. In other insurance sectors, underwriters have lots of data that help them to calculate risk and determine policy rates, premiums and coverage. For C.I., it’s not so simple. This is because cyber insurance is new, and there isn’t much information about it yet.
Why is cybersecurity insurance important?
Losing data through theft or compromise has the potential to have a huge impact on an organization. For example, it can mean customers go elsewhere and cause a loss in revenue. What’s more, without cybersecurity insurance, businesses could be liable for any damages that stem from third-party data being stolen or compromised.
Cybersecurity insurance is essential if businesses want to protect themselves against cyber event risks, including any linked to terrorism. In addition, coverage for cyber threats can help remediate cyber incidents promptly.
Back in 2011, the PlayStation Network suffered a breach by hackers. This breach exposed the personal data of some 77 million users. It meant that PlayStation users were unable to access the service for over three weeks. In terms of cost to Sony racked up, over $171 million in damages due to this breach. Sony could have saved themselves some of the $171 million had they had a cybersecurity insurance policy – but they didn’t. A subsequent court case ruled that their insurance policy only covered physical damage, which meant that Sony had to pay the full costs of the cyberattack.
How does C.I. work?
Many business insurance providers that provide insurances like commercial property insurance or business liability insurance will also provide cybersecurity insurance. Most C.I. policies cover the first party (losses that impact a company directly) and cover third-party losses (losses by other people caused by a cybersecurity incident, depending on their relationship to the organization). Cybersecurity insurance will help cover any losses resulting from cyber incidents and events.
What’s more, it can also help with costs that are linked to remediation, such as paying for legal assistance, crisis communicators, investigators, customer refunds, and customer credits.
Who should get cybersecurity insurance?
Companies who manage, store or create electronic data like contacts, sales, credit cards could benefit from C.I. E-commerce companies could also benefit from downtime because a cyber event can potentially lose customers or sales.
In a similar vein, any company storing client information online will benefit from cybersecurity insurance and its liability coverage.
What doesn’t a cybersecurity insurance policy cover?
Whenever a business purchases a cybersecurity insurance policy, it’s important to check the policy documents carefully. Depending on the type of policy and price, the customer may also be covered for other costs. Examples include paying legal fees, costs of notifying customers, meeting ransomware demands, costs of recovering data, etc.
How should businesses choose their cybersecurity insurance policy?
Since cybersecurity insurance hasn’t been around very long, policies and prices vary between providers. When they think about it, businesses should know what they want their policy to cover. Depending on the industry, different organizations will need different covers. You can book a complimentary Cybersecurity Business Review with us – this has a value of $2,500! Alternatively, you can watch an expert discuss how a business can get denied of C.I.
Having a Managed Service Provider help you through the application process is a good idea. After all, the MSP will know exactly what coverage your business will need. Without an MSP to help you, you risk making a mistake as Sony did.