What Cyber Insurance Covers

Cybersecurity Insurance: What Cyber Insurance Covers and the Requirements

From 2020, the entire globe seemingly got into a new era of cyberattacks. Cyber risks became more prevalent as the bad actors looked for possible loopholes to access organizations’ data as companies adapted to remote working. There was a significant acceleration of breaches, ransomware, phishing, and other social engineering attacks on small and large companies and almost all industries from technology, manufacturing, healthcare, and more. A recent study revealed that more than 60% of businesses were victims of ransomware attacks in 2020 as cyberattacks took advantage of the lax security controls.

With the rising cases of cyberattacks, businesses have found cybersecurity insurance to hold much value in recent years. The purchase of cyber insurance policy is now on an upward trajectory from businesses of all sizes, as startups to Fortune 500 companies look to it as a solution to mitigate potential losses in case of a breach. This insurance cover protects against the massive losses associated with data breach incidents that can take weeks or months to recover. In fact, a report by Index Market Research shows that the value of the global cyber market will be approximately $22.5 billion in 2030, which is a significant rise from $4.3 billion in 2018.

Read on for more insights.

What Is Cybersecurity Insurance?

Cyber insurance, also called cyber liability insurance or cybersecurity insurance, helps protect companies experiencing financial losses from a cyber incident such as data breaches, business interruptions, or network damage. Cyber liability insurance can help your business get back into normal operations.

Why Should You Consider Cybersecurity Insurance?

There are several reasons why organizations should prioritize cybersecurity insurance. Some of the main reasons include:

• Data breach incidents cost businesses huge losses. In some worse cases, some enterprises end up closing down. Therefore, instead of spending a significant amount on remediation, it’s a good idea to purchase cyber liability insurance. A recent survey showed that the cost of a cyberattack is around $200,000. This is more than enough to send a small company out of business.
• You need to protect your customers’ sensitive data. This way, your customers will trust your business, and they won’t worry about breaches or cyberattacks.
• The General Data Protection Regulation put in place by the European Union introduced a gigantic fee in case of a data breach. Even if you run a financially strong company, these fines can shatter your business.
• Investors and funders don’t want a company that is can quickly go down after a cyberattack incident because they won’t have a return on their investment. Cyber insurance will give investors more confidence in your company, knowing they won’t lose their investment. 
• While data breaches are the main part of the attacks from the bad actors, data surfaces and your network can also encounter different attacks such as DDOS and DOS. These attacks can easily deface your services or shut them down, which will lead to further losses in your company.

What Does Cybersecurity Insurance Cover?

When purchasing cyber liability insurance, you need to know what each policy covers. Most cyber insurance providers classify their policies into two categories to meet the demands of their clients. You can either choose the first or third-party coverage. First-party cyber insurance covers the damages you incur after a cyberattack, such as the cost of data recovery, lost revenue, repairs, and more. On the other hand, third-party cyber insurance covers the legal expenses from negligence claims, privacy lawsuits, and other similar suits. If you choose a comprehensive cybersecurity liability cover, it should cater to both first and third-party damages.

First-Party Damages

These damages primarily encompass damages to your organization resulting from theft or loss of data. You can have everything covered with a typical plan, from insider threats, cybercriminals attacks, and accidents like hardware malfunctions or power surges. A first-party cyber insurance policy can cover the following costs:

• Data recovery services
• Lost revenue
• Documenting and investigating the source of a breach
• Software and hardware repairs
• Process of setting up credit monitoring services for your clients
• Notifying business partners, clients, and regulatory agencies

Third-Party Damages

These damages include all the claims made against your organization after a security breach. If cyber attackers managed to steal personal information or sensitive data, your company might be in trouble with government agencies, business partners, and customers. Third-party insurance will play a crucial part in covering your legal defense costs. This can be in cases such as:

• Settlements
• Breach of contract or negligence claims
• Fines due to compliance regulations
• Privacy lawsuits

What Does Cybersecurity Insurance Exclude?

Some things may be essential to your organization, but they are not part of cyber liability insurance. Therefore, you need to understand what a cyber insurance policy covers. Some of the cyber risks that aren’t part of cybersecurity insurance include:

• If you lose sensitive data due to a network or technical interruption
• In case a public authority or governmental authority made any order or move, this may also lead to denial of insurance.
• Reputational and financial damages. For instance, your cybersecurity insurance can pay for the costs associated with a cyberattack. However, your business may lose customers due to public perceptions of poor cybersecurity mechanisms in the long term. A cybersecurity policy won’t cover the cost of losing clients due to a bad reputation after a cyberattack.
• Also, when it comes to cyber insurance claims, you have to answer various questions, such as the security measures you’ve taken to secure your business data. If you don’t have the necessary security mechanism in your organization, then the insurer can cancel the claim. However, since the main idea of cyber insurance is to protect your business from unknown sources, this isn’t applicable in all policies.

What Do I Need to Qualify for Cybersecurity Insurance?

A few years back, companies found it easy to obtain a cybersecurity insurance policy. However, the recent rise in sophisticated cyberattack incidents has made insurers introduce minimum requirements for organizations seeking this policy. Most insurance companies will carry out an underwriting procedure that will involve a cyber insurance risk assessment. Depending on your company size, this process can involve an in-depth analysis over several weeks or just a simple questionnaire by a cybersecurity firm. Your business should meet the basic IT security standards to qualify for cybersecurity insurance.

Below are some of the requirements the insurers may have to approve for you to qualify for cybersecurity insurance:

Firewalls

When you have a next-generation firewall, you introduce inline security features such as intrusion prevention, threat intelligence, application awareness, and control. These measures ensure that everything gets scanned for possible threats in real-time. Note that for your business firewall to be a next-gen firewall, it should have:

• Intrusion prevention
• Threat intelligence sources
• Standard firewall capabilities
• Upgrade paths
• Application control and awareness

Strong Password Policy

With a strong password policy, you force employees to employ strong passwords. This is a crucial part of a company’s cybersecurity protocols to protect your accounts from getting into the wrong hands.

Endpoint Protection

This is the process of securing all your endpoints on devices such as laptops, mobile phones, and desktops. Essentially, this is an anti-malware, anti-virus, and anti-ransomware software.

Offsite and Local Backups

You can store your applications, data, and systems to a reliable local drive or offsite. Local backups help to recover data quickly since you depend on an internet connection, and you know the location of your data. However, a physical disaster can lead to the destruction of your local backup. Therefore, having an offsite backup helps protect your applications and data in case of a breach, theft, or disaster.

Multi-Factor Authentication

MFA is a login feature that protects against identity-based attacks by confirming your identity when signing in. With MFA, you have an added verification process while login in so that only authorized persons can access an account.

Patching

Keeping your systems up to date is crucial to preventing cyberattacks. This ensures that you have the latest security updates to help you prevent new malware threats that amount to about 230,000 each day. Besides, new vulnerabilities get patched every time, making it easier for a cybercriminal to gain access to your software when your programs aren’t updated.

Generally, you will need to have certain cybersecurity measures to obtain cyber liability insurance. One of the most effective ways of ensuring that you have the best measures in place is to work with a reliable managed IT service provider such as MicroXpress Inc.

MicroXpress Inc Can Help You Qualify for a Cybersecurity Insurance Policy

With the high prevalence of data breaches or cyberattacks, no business is immune to these attacks. Therefore, cybersecurity insurance will help to mitigate against the impacts of a cyberattack, which will ensure business continuity. However, before buying a cyber-insurance policy, you also need to have the necessary security mechanisms to prevent possible risks from malicious actors.

At MicroXpress Inc, we can provide the necessary assistance in ensuring that you have cybersecurity measures in place. We have the expertise and skills required to review your systems and audit your policies. With the best cybersecurity practices in your business, you will mitigate the risks of an attack as well as secure cybersecurity insurance. Reach out to us today for more consultation on how we can help.

Thanks to our colleagues at Orbis Solutions in Las Vegas for their insights into this article.