Have you ever give a thought to what it would mean to your business if a data breach were to happen? Businesses are failing to appropriately secure their data from cyber breaches do not only put a few documents or brand reputation in danger. It is indeed more than that. Simply put, data breaches are capable of putting the entire life of businesses at risk. So, your business should not even think about claiming to be a victim of a breach. Now many organizations see cyber insurance as an indispensable piece of their risk management program, as it can be an intelligent precaution for any size business. We at Swiss Cyber Forum designed this article to help you understand the basics of cyber insurance, how it works and what does cyber insurance cover.
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What is cyber insurance?
In the most basic sense, cyber insurance is an insurance product designed to cover consumers of technology services / products. Commercial operations are increasingly dependent on digital technologies which encounter a perpetual threat of disruption due to malicious attacks. Recently we shred a blog post called the A-Z guide of advanced persistent threat (APT), so make sure to have a look through it.
It is no secret that the use of digital technologies in commercial activities is posing considerable benefits, particularly in terms of efficiency. However, it is also creating serious risks. Given the situation, cyber insurance is intended to protect businesses against technology-related crimes or losses. This can include distributed denial-of-service (DDoS) attacks, malware, phishing, the encryption of third party data, employee negligence, misuse of digital systems.
What does cyber insurance cover?
Many cyber insurance plans cover a wide range of cyber risk losses that may abruptly originate from cyber attacks. Cyber risks fall into 2 categories: first-party risks and third-party risks.
1. First-party insurance
This insurance covers business’s assets, such as business interruption from network downtime, loss of revenue due to interrupted business, theft of digital resources through theft of equipment, extortion payments demanded by cyber criminals, and other ancillary costs. First-party cyber coverage can pay for costs like notifying impacted customers and public relations campaign for damage control to to maintain the brand’s reputation.
2. Third-party insurance
This type of insurance covers the assets of others, typically the customers of a business. This includes legal fees, cost of investigating a cyber crime, loss of third party, data settlement costs, and also fines from regulatory bodies. Moreover, third-party cyber coverage can pay the vital legal fees (lawyers’ fees and other court expenses) to defend the business in court.
What does cyber insurance not cover?
Cyber insurance does not cover any fraud, dishonesty, or deliberately illegitimate act of the organisation or its employees. Losing some kind of property, like a tablet or computer, is not covered by a cyber policy. Another interesting fact is that cyber insurance companies do not cover social engineering loss. Social engineering is a form of psychological manipulation utilised by criminals to take advantage of a victim’s emotional reactions. So, oftentimes, traditional crime policies mention exclusions that present obstacles to social engineering claims. Yet, some cyber insurance policies are known to come with a smaller coverage limit.
How much does cyber insurance cost?
There are numerous factors that influence the cost at which insurance companies are willing to propose coverage for a given risk, which are as follows:
- the scope of expected losses;
- the level of uncertainty in calculating anticipated losses;
- the variety of the pool of risks covered.
Generally speaking, the company’s capability to prevent a cyber incident and coverage limit are the two major elements in defining the costs, as well as number of unique personal information records stored on the insured’s systems.
The size of your company also matters. The more employees you company has, the bigger the risk of malicious attacks you face. small businesses with a limited information base will obviously pay less for their cyber insurance. By contrast, a retail store handles a massive amount of customer information, so for them the price of a cyber insurance will be costly. Last but not least, the type of sensitive information you store also has an impact on insurance cost. Cyber insurance is known to be somewhat pricey compared to other types of insurance coverage.
GDPR and the demand for cyber insurance
General Data Protection Regulation (GDPR) was put into effect on May 25 of 2018 in all member states to harmonize data privacy laws across Europe. This privacy law imposes obligations onto organizations anywhere, as long as they gather data related to people in the European Union. The regulation is far-reaching. It makes GDPR compliance a frightening prospect, especially for small and medium-sized enterprises.
There is a general assumption in the market that the implementation of the GDPR will prompt a substantial rise in the demand for cyber insurance. The GDPR seems to have been gradually enhanced awareness of cyber risk over the last two years. So, there is no question that the regulation shows its impact on cyber insurance. Yet, it is a new law and there will be some unanticipated situations on how the GDPR will precisely drive changes.
Ready to start your cyber insurance journey?
Cyber crime is a serious threat to organizations across the world, and cyber attacks are increasing in complexity in recent years, causing immense damage. In the face of that problem, organizations are accordingly raising their investments in more solid infrastructure to protect their assets. But the full protection against these continuously evolving threats appears to be unachievable by the sole utilization of preventive efforts. Hence, to handle risks in case of a cyber incident, organisations are incorporating a cyber insurance into their security frameworks.
We are proud to announce that we published our first whitepaper, through which you can learn how can data breaches be prevented. You can download a copy free of charge by clicking here. Cyber security jobs are in high demand, therefore we thought it would be beneficial for you to have an overview of cyber security jobs salary in 2020. Please visit our website o learn more about Swiss Cyber Forum’s events and exclusive content.