Cybersecurity insurance (cyber insurance) is a product that enables businesses to mitigate the risk of cyber crime activity like cyberattacks and data breaches. It protects organizations from the cost of internet-based threats affecting IT infrastructure, information governance, and information policy, which often are not covered by commercial liability policies and traditional insurance products.

Cyber insurance coverage works the same way as businesses would purchase insurance against physical risks and natural disasters. It covers the losses an enterprise may suffer as a result of a cyberattack.

Cyber risks excluded from cyber insurance coverage

A cybersecurity insurance policy will often exclude issues that were preventable or caused by human error or negligence, such as:

Poor security processes: If an attack occurred as a result of an organization having poor configuration management or ineffective security processes in place

Prior breaches: Breaches or events that occurred before an organization purchased a policy

Human error: Any cyberattack caused by human error by an organization’s employees

Insider attacks: The loss or theft of data due to an insider attack, which means an employee was responsible for the incident

Preexisting vulnerabilities: If an organization suffers a data breach as a result of failing to address or correct a previously known vulnerability

Technology system improvements: Any costs related to improving technology systems, such as hardening applications and networks

How to choose the right cyber insurance policy?

Pricing cyber risk will typically depend on an enterprise’s revenue and the industry they operate in. To qualify, they will likely need to allow an insurer to carry out a security audit or provide relevant documentation courtesy of an approved assessment tool. The information accrued from an audit will guide the type of insurance policy the provider can offer and the cost of any premiums.

Policies often vary between different providers. Therefore, it is best to review any details carefully to ensure the required protections and provisions are covered by the proposed policy. The policy also needs to provide protection against currently known and emerging cyber threat vectors and profiles.

Why is Cyber Insurance Important?

Cyber attacks have grown exponentially in recent years, causing billions of dollars in losses and damages. In fact, cyber threat is now seen as the top risk to business in seven out of eight countries surveyed—ahead of the pandemic, economic downturn, and skills shortages.

If a business faces a significant data breach or cyber attack, it may struggle to recover without additional support and resources. After all, most businesses operate on relatively lean day-to-day budgets, and with the average global cost of a data breach totaling $4.35 million, it’s easy to see how just one cyber attack could devastate a company.

Cyber insurance plays a critical role in mitigating these growing risks for businesses, particularly as more and more organizations migrate to the cloud and support remote workers.

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