Where’s Cybersecurity Insurance Going?
Cybersecurity insurance has long existed and rescued businesses from the consequences of online risks and attacks. While it becomes more of a necessity for businesses, the rapid increase of cyberattacks and ransomware gradually spirals into an unattractive business for insurers. With cyber insurance, a company transfers its risks to an insurer for a premium. Consequently, the insurer protects the company from the risks the insurance covers.
This process is essential as it saves online companies from the consequences—financial loss, distrust, data loss, damaged reputation, and legal issues—of online risks, threats, vulnerabilities, and attacks. Even though the cybersecurity insurance market grew by an average of 9.0% per year from 2018, IBIS reports that it will increase by 7.7% in 2023.
What Is Cybersecurity Insurance?
Cybersecurity insurance, also known as cyber insurance and cyber liability insurance, is a form of safety or cover a business entity applies for from online attacks, threats, and risks in cyberspace. As cyber risks increase, businesses take cover to avoid the consequences of being affected. Cyber liability insurance provides companies with the support needed to stay ahead of malicious activities. Likewise, it offers companies the comeback they need if affected at all.
Cyber insurance offers three significant types of coverage:
- First-Party Coverage: First-party cyber insurance involves offering financial assistance to companies that need to mitigate the effects of online attacks. It often covers the cost of investigating online incidents, financial loss, organizing PR campaigns, notifying customers of a digital incident, providing credit monitoring, and coverage-based payment in the case of ransomware.
- Third-Party Coverage: Third-party coverage provides liability protection when a third party suffers a cyberattack and brings a claim against the company involved. It covers payment to the affected third party, hiring an attorney, paying court fees, fines for non-compliance, and paying damages.
- Technology Errors and Omissions: Technology error and omission insurance comes into play when an attack occurs due to a company’s error. This insurance often covers companies that sell products and services. For instance, if a company develops software with a security vulnerability, it would cause problems for the users. So, if a user’s sensitive data is stolen due to this vulnerability, tech error and omission coverage will take care of court cases, legal fines, and some related costs.
Cyber insurance is limited as it does not cover issues associated with intellectual property loss, DAMA property, and the cost of proactive online measures.
Why Is Cybersecurity Insurance Important?
The alarming rate of online incidents is a significant reason for a business to stay cyber-insured. Listed below are the reasons why cyber insurance is important for companies:
- Risks and Potential Damage Caused by Cyberattacks
Statistics have shown that cybercrimes will cost companies worldwide $10.5 trillion annually by 2025 (up from $3 trillion in 2015). This shows companies must brace themselves through online insurance to come back strong when hit. Your company needs insurance to win against bad actors and get back into operation when experiencing a digital attack.
Cyberattacks often lead to a lack of trust, legal issues, and financial loss. With cyber insurance, your insurers will handle the cost associated with the digital risks your company encounters. Cyber insurance also secures your business from future issues, such as lack of trust, and disassociation by clients/employees/customers/vendors.
- Legal and Regulatory Compliance Requirements
Governments and certain bodies often set regulations that guide the actions of individuals and companies. Some regulatory policies are cyber-related, and companies/individuals must strictly adhere to them. Non-compliance with these regulations often leads to data breaches and risks. This further leads to legal actions, huge fines, and reputation damage. So, when a company is caught in the web of non-compliance to regulatory requirements, cyber insurance can help.
- Business Continuity and Reputation Protection
Cyber insurance can redeem your company’s image after a digital attack. It also helps to get your company back in operation after experiencing a major online attack. It covers all the financial implications of retaining customers, protecting the company’s reputation, etc.
How Does Cybersecurity Insurance Work?
Getting cybersecurity insurance requires you to undergo different processes. Before applying for cyber liability insurance, you must first consider its coverage limits and exclusions. Also, you need to go through the underwriting process.
The underwriting process requires your insurer to evaluate your company by considering the potential risks it might encounter. The insurer then weighs the cost of mitigating those risks and a company’s security facilities/history before setting a coverage price. Some of the facilities/history all insurers measure include data management processes and records of data breaches.
Similarly, cyber insurance requires a claims process. An insurer uses this process to investigate a reported digital issue before releasing payment. During the investigation, the insurer will discover if the submitted claim is valid. Coverage limits and exclusions of cybersecurity insurance are government orders, wars, loss of devices, intellectual property, etc.
Choosing and Costing Cybersecurity Insurance
Choosing the right cyber insurance requires different considerations. Before choosing a policy, read through what it includes—coverage, terms & conditions—and see if you and your insurer are on the same page. Find out which online attacks you are protected from and those the insurance does not cover. Likewise, identify your company’s risk tolerance, that is, the level your organization requires its insurer to protect its assets from online risks.
The decision-makers in your company should evaluate the available coverage options. This way, they can discuss the advantages and possible disadvantages of choosing an insurer. In addition, do your due diligence before taking cybersecurity insurance coverage. Find out the types of coverage an insurer offers, including the relevant costs and exclusions.
Insurers often provide companies with their coverage prices, so there is no need to worry about calculating the cost. The cost of cyber insurance is inevitably based on the desired level of coverage. For example, an insurer who wants to offer a company first-party coverage, third-party coverage, and tech error and omission will charge more than when it only offers one of these elements. Once the coverage is known and the price is set, the insured party pays specific amounts at set times: monthly, quarterly, or annually. Insureon, an IT business insurer, suggests cyber insurance costs an average of $1740 annually. This equates to a $145 monthly payment. However, note that your coverage cost depends on your business type and the level of risk you are exposed to.
Future of Cybersecurity Insurance
The insurance sector contributes largely to the well-being of other sectors. Despite this, the sector faces different challenges that limit its growth. Some of them include the inability to adopt technological solutions to customers’ needs, focusing on protecting their customers while they forget to protect themselves, skill shortage, the rising demands of customers, and lack of funds.
Technology can help insurance companies overcome some of the challenges they face. For example, insurance companies should use security tools to fight fraud. These tools can help them easily differentiate between fake and real documents for insurance applications. For cybersecurity insurance, experts have predicted that the cost of getting insured will continue to rise. Likewise, insurers will require companies to maintain cybersecurity instead of relying entirely on cyber insurance.
Conclusion
Cybersecurity insurance secures companies from the aftermath of online risks, threats, and attacks. This requires companies to pay a certain amount to their insurers. It protects them from the financial issues that stem from non-compliance with online regulatory policies and aids business continuity. To stay ahead of the consequences of digital attacks, you should ensure to implement protective security measures. If you need a company that can help you implement these security processes, contact us at GuardRails now.
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*** This is a Security Bloggers Network syndicated blog from GuardRails authored by GuardRails. Read the original post at: https://blog.guardrails.io/wheres-cybersecurity-insurance-going/
