Cyber Insurance 101: What Is It and Why Does Your Business Need It?
As our world continues to become more interconnected and reliant on technology to do business, conduct financial affairs, shop, share information and care for the population, the rate of cyber crimes continues to surge. From identity theft to business breaches and from financial fraud to sensitive data collection, cyber crimes have become a focus for many business leaders hoping to mitigate and protect against these threats. Statistics show that these threats will continue to evolve as our technology and use of it grows. According to the Federal Bureau of Investigation, more than 343 million people were victims of cyberattacks in 2023. This is a 1517% increase from 2001. It’s not just the rate of cyber crimes that are increasing. The cost of cybercrime is expected to increase from $9.22 trillion in 2024 to $13.82 trillion by 2028. (FBI.gov) So what can business leaders do to protect themselves and their workforce from cyber crimes? Part of the answer may lay in cyber insurance. Let’s explore this new frontier of insurance to mitigate online crimes as well as examine what is covered and why it may be beneficial for your organization.
What Is Cyber Insurance?
Cyber insurance, sometimes referred to as cyber risk or liability insurance, is a form of insurance that protects businesses from financial losses caused by cyberattacks and data breaches. With a large majority of organizations using digital technology to conduct business across the globe, it is a fairly new concept that is becoming more commonplace as the risk of cyber attacks rises.
What Does Cyber Insurance Cover?
While every policy differs, most cyber insurance policies cover things like data loss including the cost of recovering or replacing lost/stolen data. In terms of notifying clients or customers of the loss of data, cyber insurance will cover the cost of that notification. Cyber insurance may cover the expense of downtime your business may experience in the wake of a cyber attack. For instance, should an outage or hack bring your business network down, you may be compensated for the interruption time and loss of income during that period. This type of business insurance can also assist with the investigation to determine the root cause of the cyber crime as well as the scope. Forensic investigators will need to be hired to help protect your business in the future by understanding what went wrong this time. Ransomware is an evolving and frightening aspect of cyber crimes that could cost your business if you want to pay the ransom to get the data returned or at least access to the data returned. Cyber insurance can assist in the payment and cover your business as you mitigate the situation.
What’s NOT Covered with Cyber Insurance?
Again, every policy is different, but most cyber insurance policies will not cover previous breaches or vulnerabilities that were not resolved from a previous breach. Additionally, cyber insurance may not cover incidences that were perpetrated by insiders/employees or were caused due to inadequate security measures or negligence.
Why Your Business Needs It
Businesses should consider cyber insurance especially if they deal with client data that includes personal or sensitive identifying information such as a social security number or financial information. If your company has a significant online presence or relies heavily on technology for operations, cyber insurance can help organizations recover faster and with fewer headaches than those who do not have this coverage. Cyber liability or risk insurance can be purchased through many business insurance brokers. To evaluate how much and what specific coverage your business should obtain, talk to our team here at Spectra Networks.
