- January 13, 2022
- Tag: Insurance
The widespread impact and losses associated with today’s cyberattacks carry an average annual cost of around $4 million. Such hefty financial losses have elevated cyber insurance’s importance from a “nice to have” to a “must-have” component in business operations. Therefore, it is no surprise that cyber insurance clauses are embedded in business contracts to help mitigate the probability and likelihood of cyber incidents. As a result, preparing for cybersecurity risk is now synonymous with preparing for a natural disaster in the business landscape.
The particularities of cyber insurance policies are becoming increasingly fluid as threats evolve faster than legal parameters can accommodate them. Therefore, as an organization equipped with cyber insurance, do you know the specifications and limitations of your coverage? Are there critical business processes that your organization is engaged in which are unknowingly uncovered under your cyber insurance? Your organization could lose millions due to misconfigurations associated with poorly implemented cyber insurance policies.
In this article, Goldsky Security experts share actionable steps and best practices to limit the financial impact of security incidents on your organization. In addition, we break down how to ensure that all phases of your business processes, including money transfers and data sharing techniques, are adequately protected under your current cyber insurance policy.
Managing Cyber Insurance Policy in a Dynamic Cybersecurity Environment
Cyber insurance has arguably been in existence since the 1990s. However, its importance is felt more today than ever before because of the impact and frequency of cybersecurity incidents and subsequent losses. In addition, a reliable and adequate cyber insurance policy can decrease risky operational costs and facilitate a quicker recovery after a cyberattack. As such, the demand for cyber insurance seems to be greater than its supply.
Therefore, security researchers predict that the cyber insurance market will reach a valuation of $20.4 billion by 2025—from $7.9 billion in 2020. Due to the threat volatility and magnitude of losses, cyber insurers typically take a limited-scope approach to loss coverage which could be challenged or withdrawn at any time. Therefore, organizations must possess access to historical threat data, accurate risk assessments, and a list of changes in operational processes to effectively negotiate the outcomes of their cyber insurance policy on an annual basis. As insurers acquaint themselves with the constantly evolving nature of the cyber threat landscape, the onus is on organizations to foster a proactive approach to cyber insurance policy management to assure continuous coverage against potential losses linked to cyber incidents.
Six Crucial Components to Consider Before Purchasing a Cyber Insurance Policy
Insurance Policy That Aligns with Organizations’ Risk Exposures
Annual cyber risk assessment is not enough. With adaptive cyber insurance, organizations can ensure continuous risk assessment and monitoring. While selecting your cyber insurance policy, check whether the advertised risk and loss coverage is favorable to the rapidly evolving risks businesses of all sizes face today and will continue to face in the future.
Enterprise Risk Assessment Results
Before opting for a cyber insurance policy, organizations must conduct a full-scope cyber risk assessment to understand and evaluate their risk maturity level and their resilience to security incidents. Factors like industry type, applicable rules and regulations, the amount of consumer data stored, and the number of third-party associates who can access sensitive data should be considered. It is easy to identify and mitigate your security and privacy program gaps with comprehensive privacy and security risk assessment.
Understand the Cyber Insurance Coverage Limit
Traditionally, organizations hold general liability insurance that covers tangible property. Although most cyber insurance policies cover data breaches, remediation costs, and regulatory and legal fines, they do not explicitly cover first-party breach notification costs or losses associated with specific business processes. Thus, they fall short when an unexpected security incident leads to significant financial losses.
Because these gaps can mean that an organization must bear the total cost of data breach response, it is necessary to understand the insurance coverage limit to prevent discrepancies. Additionally, cyber insurance coverage limitations vary across insurance providers, industries, and organizations’ risk profiles. Therefore, make it a habit to thoroughly evaluate the cyber insurance coverage limitations with internal cyber insurance experts versed in cybersecurity’s technical and legal realms.
Explore Other Value-Added Services Available
Many cyber insurance providers offer value-added services to reduce breach-related risks. These often include a free consultation or expert legal advice, access to premium privacy and security resources, cyber awareness training, policy templates, and more. When selecting a cyber insurance policy, consider all the value-added services part of the overall package. It may help in lowering the insurance premium.
Integrating Business Process Changes into Cyber Insurance Coverage
The cyber operational landscape is very dynamic, which requires constant change to operational processes, technologies, and the parties involved. As such, many robust cyber insurance policies are strategically developed to account for future changes resulting from varying business processes. Therefore, before selecting a particular cyber insurance policy, organizations must ensure that the cyber insurance vendor can provide coverage for specific business (and technical) processes that keep the business functional. Often, business processes changes due to new security controls, new laws or regulations, security events, etc. Therefore, organizations must also ensure that insurance policies have wiggle room to account for these changes.
Specification and Clarity of Industry Terms and Events
Following a cyber incident, sometimes the difference between receiving an insurance policy payout and bankruptcy is the definition of the events. Unfortunately, many organizations fail to reach a consensus on the meaning of specific industry terms and events with their insurers. For instance, many people define ‘risk’ and ‘threat’ interchangeably, but both words mean different things in technical and legal implementations. Therefore, organizations must ensure that all parties understand and agree on terms, events, and implementations.
Many organizations never recover from the losses associated with cyberattacks. Cyber insurance is thus a crucial business component contributing to the defense-in-depth approach to a resilient security posture. In addition, it helps organizations protect their data from potential breaches and reduce the impact of the loss of sensitive information when stolen or misused. Considering all the essential aspects of insurance policies outlined above will help your organization maintain a proactive stance when protecting critical business processes, especially financial transfers.
All in all, organizations should collaborate with competent cyber forensics and threat analysis professionals to prevent future issues when engaging with cyber insurers. Such a collaborative effort when shopping for a cyber insurance policy will help to ensure that an insurer covers the type of risk exposures they advertise.