Cyber Insurance: what does it cover and how does it work?

Cyber Insurance

Cyber attacks are becoming increasingly common amongst organisations of all shapes and sizes, which has naturally led to many businesses taking a serious approach in protecting their interests.

To help limit the damages from potential attacks, many businesses are taking out cyber insurance policies. Known also as cyber liability or cyber risk insurance, this type of cover is designed to help protect businesses against digital threats, and in recent years, this form of protection has become increasingly popular in organisations around the world.

So, what kind of threats does cyber insurance protect you against?

Types of cyber threats

Vast levels of illegal activity occur on the internet at any given time, and there are countless cyber threats that you can fall victim to, some of the most common being:

Malware: A form of malicious software that can install itself in your systems via phishing scams and by exploiting software vulnerabilities. Once installed, the attacker can spy on online activities and steal private data.

Ransomware: This a form of malware that attacks your computer system and encrypts data. The attacker will then demand a ransom payment in exchange for the return of the data. It’s worthwhile to formulate a data recovery plan as a precaution and maintain at least one backup of your data.

Hacking: Cyber hacking is a term used for the partial or complete acquisition of a computer system or certain functions within it. There are various methods of doing so, but the aim is generally to access important data.

With countless other threats that could impact your business in the digital world, it is clear that you need suitable protection, but how exactly does cyber insurance provide this?

The benefit of cyber insurance

As with all insurance policies, different providers offer different levels of cover to suit the needs of the organisation they are insuring; however, most policies do offer the same basic benefits, the main benefit being that insurers will cover the immediate cost of a cyber attack.

Mark Bagley, VP at AttackIQ stated, “Cyber insurance policies are designed to cover the costs of security failures, including data recovery, system forensics, as well as the costs of legal defence and making reparations to customers,”

So in a very basic sense, cyber insurance can protect you from losing money through digital threats. Whether it can protect you from reputational damage is a different question altogether.

Business email compromise (BEC) phishing scams are another form of cyberattack that can cost a business huge sums of money. For these types of attacks, attackers may pose as a company director, a supplier or perhaps a trusted contact to dupe employees into transferring money. Certain cyber insurance policies do cover BEC but many don’t, so it is important to ascertain this when selecting a suitable policy for your organisation.

These additional clauses, whilst not necessary for every business should be explored with your chosen insurer, as the adage goes “it’s better to be safe than sorry”.

The benefit of obtaining cyber insurance is clear, providing protecting your business is of importance to you, which to any business owner it will be. But is it necessary for every business, or are there businesses that don’t need, or cannot obtain cyber insurance?

Who can obtain cyber insurance

All businesses that operate digitally can obtain cyber insurance, but to secure cover, your business will likely need to prove that it is already responsible with cybersecurity.

Prospective insurers will want to know what cybersecurity your company has in place when applying for a policy, and said policies need to be maintained moving forwards for the coverage to remain valid.

If you own and operate a business you can and should obtain cyber insurance, but before you do that, take a look at your current cybersecurity policies, and see where you can tighten them up and fine-tune them before speaking with your insurer. Unfortunately, even some of the most tech-savvy individuals can fall victim to cybercrime, therefore the more secure you are before obtaining insurance the greater you’ll find the benefit to your business, your reputation, and your all-important stakeholders.