Updated: Nov 30, 2021
What is cybersecurity Insurance?
Cybersecurity insurance, also called cyber liability insurance or cyber insurance, is a contract that an entity can purchase to help reduce the financial risks associated with doing business online. In exchange for a monthly or quarterly fee, the insurance policy transfers some of the risk to the insurer.
Cybersecurity insurance is designed to mitigate losses from a variety of cyber incidents, including data breaches, business interruption, and network damage. A robust cybersecurity insurance market could help reduce the number of successful cyber attacks by: (1) promoting the adoption of preventative measures in return for more coverage
(2) encouraging the implementation of best practices by basing premiums on an insured’s level of self-protection.
Many companies forego available policies, however, citing as rationales the perceived high cost of those policies, confusion about what they cover, and uncertainty that their organizations will suffer a cyber attack.
How Cyber security insurance will benefit?
Cyber security insurance offers compensation for Expenses, fees, and legal costs which arises due to cyber incidence. It also includes the loss or theft of the client/employee information due to breach in organization data. Unauthorized access is the common example of cyber security breach. That's when cyber security insurance becomes needful.
How does Cyber Security Insurance works?
Cybersecurity insurance policies are sold by many of the same supplier that provides related business insurance, such E&O insurance, business liability insurance and commercial property insurance. Most of cyber security insurance policies include first party coverage which applies to losses suffered by others from cyber event or security breach based on their relationship with that company.
Most of the time cyber security insurance policies cover financial losses that occurred due to cyber security incidents or breaches. Also, cyber risk coverage helps with the cost associated with remediation.
Besides legal fees and expenses, cyber insurance typically helps with:
Notifying customers about a data breach
Restoring personal identities of affected customers
Recovering compromised data
Repairing damaged computer systems.
Who needs Cyber security Insurance ?
Businesses that create, store and manage electronic data online such as Customer contact, Customer sales, Credit card information can benefit from cyber security insurance. Also, e-commerce businesses can benefit from cyber security insurance, since downtime related to Cyber incidents can cause a loss in sales and customers.
What isn't covered by cyber insurance?
There are some things that could be important to organizations that don't tend to be covered by cyber insurance and it's vital to understand what isn't covered, so protecting these assets can be properly managed. The financial damage caused by loss of intellectual property isn't covered by cyber insurance and neither is the reputational costs that can be incurred following a cyberattack.
What is the future of cyber security insurance?
As the frequency of cyberattacks continues to increase and cybercriminals get more brazen with campaigns, the way cyber insurance operates is going to evolve. As previously noted, cyber insurance providers are unlikely to want to offer policies to organizations that pay little attention to their cybersecurity. Paying out an insurance claim is a purely reactive activity and is costly for the insurance provider. That's why some are starting to take a more proactive approach to cybersecurity, not only there to offer a payout if things go wrong, but actively aiding clients to take a better approach to cybersecurity.