Must Know About The Risks Of Cyber security Insurance
Cyber security is a critical concern for organizations of all sizes. While the benefits of information technology are apparent, the risks that IT brings are formidable. There is a growing prevalence of cyber-attacks including hacking, phishing, identity theft, ransomware, and DDoS. So let's take a look below at the risks that cybersecurity insurance can mitigate.
Technological risks materialize, they can be disruptive and expensive. One report estimated the cost of cybercrime could rise to an impressive $ 6 trillion by 2021. Cybersecurity risks endanger transportation systems, power grids, and the very survival of large and small businesses.
To ensure these risks are contained, digital assets are protected and business continuity is maintained, companies must develop and implement robust cybersecurity practices. However, no organization, no matter how sophisticated its technique and procedural controls, is immune to attacks. While controls are important, companies don't pay as much attention to cybersecurity insurance.
The cost of a data breach is more than replacing lost equipment, repairing databases, reimbursing customers, and strengthening procedures. Compliance with relevant regulations can increase expenses as well, such as requiring customers to be notified.
Thus, cybersecurity insurance will not prevent a cyber-attack or completely compensate your business for the financial costs incurred after one. However, insurance is required for companies seeking a comprehensive cybersecurity strategy.
Few Risks Of Cybersecurity Insurance Can Manage
1. Privacy Incidents
A cybersecurity insurance policy can provide protection following an incident that threatens the privacy of customers and employees. This protection will cover not only the cost of responding and managing data breach (such as notifying affected people, establishing call centers, forensic investigations, and credit monitoring) but also the responsibilities of third parties that may arise as a result.
2. Responsibility for Network Security
Cybersecurity insurance can protect businesses from third-party liabilities caused by security events occurring within the corporate network and attacks that leverage the organization's digital assets.
In other words, compromising network security may be part of a broader and more sophisticated cyber-attack on the business itself or simply a means of delivering malware to others.
3. Damaged Software and Data
Business applications and data may be corrupted by a system crash or (deliberately or accidentally) deleted by an authorized user or third party. Restoring software or repairing data requires time and money.
Cyber â€‹â€‹security insurance can offset the business by hiring costs from outside experts to perform this task.
Cybercrime is the use of an organization's computers and technology infrastructure to steal money or commit fraud that affects the ownership of securities, property and other assets.
Typically, this would be covered by a comprehensive company crime insurance coverage, but some companies may want this to fit into their independent cyber security insurance policy.
Ransomware took the world by storm as cybercriminals block corporate computers and require payment of the organization before they can give up access.
In addition, a cybersecurity insurance policy can cover the costs of resolving the incident, including hiring outside technical experts and negotiating redemption.
In certain cases, insurance can take care of the agreed ransom payment, although this is a sensible move that may be illegal.
Attackers install software to shut down business systems or take businesses offline. Ransom must be paid before 'ransomware' is removed or disabled.
In its variations, the attacker threatens to corrupt data so that it cannot be used if the ransom is not paid.
6. Network Business Interruption
Disaster recovery plans are designed to protect a business from significant disruptions to operations. There may, however, be circumstances in which it takes hours, days, or even weeks for the disaster recovery process to start and operations to be restored.
For a business, such a prolonged outage can cause huge losses due to lost sales and the cost of restoring normalcy. Insurance coverage aims to compensate the business for these losses.
However, thanks to the expansive and relatively unpredictable nature of aggregate exposure and the costs of a single outage, some insurers are reluctant to cover this.
7. Physical Damage
A cyber-attack can cause physical damage to property and equipment. Think of a malware infection that interferes with the power grid or hacking that compromises a data center's cooling system. It does not help that, with the Internet of Things (IoT) gaining strength, a growing number of common home and office appliances are connected to the network and can be hijacked for harmful purposes by third parties.
Cyber â€‹â€‹security insurance policies that cover the cost of physical damage after a cyber-attack remain relatively rare. However, this is likely to change, thanks in large part to the proliferation of IoT devices.
8. Damage to reputation
Reputation is often the most lasting repercussion of a cyber security breach. Its effects can last long after the incident has been resolved. A diminished reputation would see a rise in customer turnover or a decline in business revenue. Companies can cover these costs through a cybersecurity insurance policy.
This occurs on the condition that the loss of reputation is attributed directly to the breach event. Difficulty in establishing the link is why this cover is seen as secure but with restrictions.
Some cyber security risks are difficult to handle. These include the following:
Industrial espionage and intellectual property theft:
Insurers avoid providing cover for direct losses caused by industrial espionage and intellectual property theft. These include losses due to impaired intellectual property assets or declining market share. Losses are not only difficult to prove but quantifying them is extremely complex.
Thus, some cybersecurity insurance policies will cover the cost of seeking third party claims for or benefiting from theft of the company's intellectual property.
Death and Injury:
We mentioned earlier how some cyber-attacks can cause damage to physical property. In addition to the threat to inanimate objects, humans could also be injured or killed in the process. This risk is considered uninsurable under a standalone cybersecurity insurance policy simply because it is already covered by other liability insurance products.
However, an autonomous cyber insurance market against death and personal injury caused by a cyber attack may arise if there is a greater frequency of cybersecurity exclusions in general liability policies.