Many security experts recommend that organizations obtain cyber insurance. However, these same organizations often do not fully understand what it is or how it works.
Just like health insurance cannot keep you from getting sick or car insurance keeps you from having an accident, cyber insurance cannot keep you from becoming the victim of a cyber attack. But also like health insurance and car insurance that provide financial assistance after an illness or accident, cyber insurance can help to defray the costs associated with recovering from a cyber attack.
The most common attacks for which claims are made include ransomware, business email compromise and fund-transfer fraud.
What is very important to understand is that having cyber insurance does not mean you have transferred the risk or responsibility to your insurer nor does it mean that you do not need cyber security. Ideally, you should have both. (At a minimum, you should have cyber security in place. Cyber insurance is optional.)
Cyber insurance will neither resolve your cyber security issues nor will it prevent an attack. It will, however, cover the immediate costs incurred after your organization becomes a victim of a cyber attack. These can include data recovery, forensics, legal representation, customer compensations, etc. Some policies may cover the cost of ransom but paying the ransom is highly discouraged.
The damages that are not – and cannot – be covered include the cost to an organization’s reputation and future loss of business as a result. As we have noted previously, 60% of small businesses that are hit by a cyber attack go out of business within 6 months. No policy can prevent that.
Generally the cost of a policy will depend on the size/type of organization, annual revenue and the security of the network. That is, if your organization has ongoing threat assessments, vulnerability scans, network analyses, endpoint protection, and security awareness training, just to name a few, then your policy and coverage will be much better than for an organization that has no firewall, no policies in place, no security training, etc. Just like a health insurance policy that will cost more for a stunt man who smokes, has high blood pressure and bungee jumps as a hobby while it will cost less for someone who has an office job, has a clean bill of health, doesn’t smoke, and reads for a hobby.
Upon application, most insurance providers will require that your organization have some level of cyber security in place. That is, on-going cyber security, not just a firewall and anti-virus installed that is never updated.
Recently, many cyber insurance companies are requiring that the insured organization utilize multifactor login authentication for all employees and users of their networks. As cyber attacks become more sophisticated, the level of expectation from the insurance providers increases in order to help keep you safe…that is, safe from cyber attacks and filing a claim.