The Pros and Cons of Cyber Insurance
As the world of finance becomes increasingly digitised, businesses can expect to come under threat from cyber-attacks. For many firms, cyber insurance can provide a much-needed shield against this danger.
Cyber-attacks are the new normal, so CEOs are looking for ways to protect their businesses from emerging risks. From large corporations to small businesses, everyone is a potential target for hackers.
In 2020, the trend does not seem to be submerging. Hence, many are looking into a form of cyber insurance that would cover them if worse comes to worst.
The question presents itself: what is this insurance coverage, and what does it leave out? And, more importantly, what are its main pros and cons?
Cyber Insurance: What Does It Cover?
In no particular order of importance, cyber insurance covers the following:
1. Media Liability
Advertising your services can result in intellectual property infringement. Cover insurance covers its consequences (patent infringement not included). Do note that it covers both online and offline forms of advertising.
2. Network Security
With information and privacy risks abound, you need to keep your bases covered against network security failure. It includes malware infection, business email compromise, cyber extortion demand, and ransomware.
If you have cyber insurance, you can recover first-party costs related to:
- IT forensics,
- data restoration,
- legal expenses,
- notifying your customers of the breach,
- public relations,
- identity restoration.
Cyber insurance covers against malware infection, business email compromise, cyber extortion demand, and ransomware.
3. Errors and Omissions
If a cyber-attack hits you, you could find yourself no longer able to fulfill your contractual obligations. That leaves your customers hanging.
You won’t afford to focus on consulting, upkeep, and other services. Once there is a cyber incident, all your time and energy go toward addressing its repercussions and minimizing the damage.
Since your customers may not be as understanding as you’d like them to be, it makes sense to protect yourself by investing in cyber insurance.
4. Network Business Interruption
Modern businesses tend to rely on advanced technology to remain operational. In the event of an incident, some form of interruption is imminent.
For instance, if your provider’s network goes down, you can’t recover expenses sustained as a result and lose profits as well. Think of system failures, unstable system patches, security failures, human error, and more.
5. Privacy Liability
When a breach happens, it can expose the sensitive data of your customers that lies on your servers. As a result, your business could be held liable.
So if it comes to a class-action lawsuit, there will be legal fees to cover. Regulatory fines resulting from the likes of GDPR are another threat. It could bring your company to its knees. Without insurance, you could find yourself closing down the doors for good.
What is Left Out?
As comprehensive as it may be, do bear in mind that cyber insurance does not cover everything. For instance, losing value due to theft is not part of it. Nor does it cover the loss of potential profits in the future. It also doesn’t allow you to improve your existing internal technology systems or amass the funds to make security upgrades.
The Advantages of Cyber Insurance
To sum it up, these are pros of cyber insurance:
- Improved standard of security. The work done by insurance companies could improve and redefine security standards.
- Financial incentives to improve IT security. Better insurance coverage at lower rates could become a possibility.
- Greater executive awareness. Recognizing the scope of cyber risks and the severity of their consequences could pave the way for much-needed security initiatives.
The Disadvantages of Cyber Insurance
As with all things insurance-related, there are also some downsides to it:
- Smaller companies could stay behind. If a business operates with a more modest budget, they may not have the funds necessary for insurance. Compared to large corporations, they would have a disadvantage as a result.
- Increased burden of legislation. Lawmakers are not IT or cybersecurity experts. Their moves may not be accurate in addressing the risks involved.
- A false sense of security. After insuring themselves, businesses may not put in enough effort into developing policies and investing in their security.
If a business operates with a more modest budget, they may not have the funds necessary for insurance.
What are The Additional Measures to Take?
As you can see, there is no one-size-fits-all solution. You need to protect your business on multiple fronts.
- Update often. As soon as developers discover a program or OS vulnerability, they rush to release a security update for it. But if you don’t take the time to install it, it may not help you in time.
- Invest in cybersecurity solutions. For starters, you should protect your systems against malware infection by using antivirus software. But there are more solutions to aid you, including firewalls, VPNs, monitoring programs, and so on.
- Educate yourself and your employees on how to protect your business against digital threats. For instance, by knowing what a VPN is and how to use it, employees can protect sensitive data from being intercepted by hackers.
Cyber insurance remains an important consideration for every executive. The more your company depends on technology, the greater is its role. Once again, assessing the risks lies on your shoulders. Depending on the nature of your business, you stand to gain more than there is to lose.