CyberSecurity Insurance - The Ugly Truth!

Cybercrimes have been increasing at an alarming rate over the past decade. By 2021, it is estimated that cybersecurity services will account for almost 50% of its total revenue used for security upgrades and maintenance. The most prevalent types of attacks in this field involve using Trojan horses to seize control of an organization's procedures or crippling day to day business processes after launching a distributed denial-of-service attack(DDoS). The consequences that follow any organization that gets in the merciless hands of the attackers is insufferable. First, your clients lose trust in your ability to perform and safeguard their personal information, and it is costly. Imagine a situation where attackers infest your systems with ransomware, and they demand money to stop the attack. This would mean your organization has to incur twice the cost; for paying your attackers, then updating your security protocols.

Cybersecurity insurance, also known as cyber liability coverage (CLIC), is a policy you purchase that covers your business liabilities in the event of an attack. For example, suppose an attack discloses your customers' private information such as their credit card or social security numbers; the insuring company will pay for all legal costs and restore the customers' private identities. However, least to mention, purchasing an insurance policy is not the answer to your organization's security needs. Whilst, cybersecurity insurance is comprehensive and useful in case of a breach, it does not protect a business from future threats, neither does it reverse a damaged reputation.

Myths around Cybersecurity Insurance

•They protect your organization against cybersecurity crimes. Purchasing a liability insurance cover does not safeguard your organization from attacks. Yes, it will cover a majority of the liable costs, but what about your reputation as an organization? Will your customers be able to trust you again? It is the individual responsibility of every company to implement the measures that safeguard their data, networks, devices, and workforce.

•They cover all costs liable. This is a myth and is also untrue. Different insurance providers cover up to a specific limit of damage depending on the policy package you purchase from that company. These policies are sold in separate modules, each of which addresses a specific scenario in case of a data breach. While one policy covers forensic expenses, another only deals with liabilities issues with third parties and so on. Most of these policies get written with much exclusion. Therefore, you must consider each one carefully and ensure all your aspects of concerns are covered before you purchase.

•Cyber Insurance is covered by other insurances you have already purchased. Cyber Insurance emerged as an entity to try and fill the voids other insuring companies did not cover. Property and crime liabilities are what most people purport to include cyber coverage, but it does not, at least not as extensively as standalone cybersecurity policies would.

•We outsourced IT, so we don’t have exposure. False, Outsourcing might lower your exposure to cybercrimes, but it does not eliminate it completely. Suppose your organization outsources its storage units to an online provider, and this provider gets breached. Of course, the third party (the online providers) will be liable for any penalties and regulatory investigation, but you will be the one to suffer reputational harm. You may still stand to lose your customers, suppliers, and other key major shareholders in your organization.

•We are only a small business. We don’t need that much coverage. Verizon's data breach investigation reports reported that there were 41,686 reported security incidents and 2,013 confirmed data breaches in 2019 alone among 86 countries. All types of businesses, from small scale to large enterprises, are prone to these attacks. More so, smaller-scale companies get hit hard because they do not see themselves as an admirable target to malicious criminals over the internet and fail to keep themselves in touch with the latest security governance technologies.

•I can cover the breach expenses. Well, I have news for you. You most certainly can’t, or perhaps you can. Let us look into the financial aspects of this. You can never know how much a breach will cost you in the first place, The informations commissioners office (ICO) will penalize for all data breaches and that can be at least 2% of your total global annual revenue. Additionally, the compensation fee payable to every customer has to be paid. Assuming it's $250 per client and you have 250 clients, that will amount to $62500, not including legal fees, if any, and other system remedy costs. You unquestionably should not put all this burden on yourself when there exists an alternative.

•We don’t need cyber insurance since we do not collect sensitive information. Cybercrime attacks in most scenarios are aimed to steal funds more than they are concerned with data. According to the 2019 Verizon Data Breach Investigations Report (graph below), the highest percentage of security breaches are financially targeted, and we all could be victims.

 Facts About Cybersecurity Insurance

Cybersecurity insurance policies are invaluable to all organizations, especially now in the market era we live in, where the internet has virtually reduced the world to a global village. A lot of our information is shared online, and we entrust it to various vendors. As customers, we must expect that our information will be kept safe and not disclosed to third parties, no matter the case. This, at times, is not the situation, cybercrimes do happen, and we get exposed. Below are the facts evolving around cybersecurity insurance, and we study to what extent they cover and in what circumstances are they appliable.

•Data breaches continue to rise yearly. By now, this should not even be news. We are all prone to attacks; it is no longer a matter of if we get attacked but when. Considering that most of our transactions get done online, we live a large footprint on the internet, which could fall on the prey's loop and harm us if not adequately guarded. Cybersecurity insurance does not magically shield us from this kind of harm, but if damages befall us as a result of cybercrimes, they help us navigate through the damages. The figure below demonstrates the high rising trajectory data breaches have followed in the past fews years, according to whamtech.com

 •Not all cyber policies are written the same. Cyber Insurance is a relatively new player in the game. It currently lacks a standardized policy frame that all other companies follow. Instead, it remains a negotiable front between you and the vendors. Even in this case, insurance companies, depending on the kind and their coverage scope, will help you alleviate the damages suffered by your organization when an attack occurs.

•Cyber Insurance is not a substitute for good security. Just like the way fire insurance does not let you go burning buildings down, cyber insurance is not an excuse to not protect your organization’s data, applications and network. Goodsecurity reduces your premium significantly. In fact, some insuring companies have to assess your security measures before getting into any deal with your organization. It still remains key for your organization to maintain relevant security protocols; cyber insuring should only serve as an added advantage and a cushion to cybercrime damages.

Reasons your organisation needs a cybersecurity Insurance

Cyber liability coverage is vital to each and every organization out in the market regardless of your size, region-based, and the level of security protocols in place. Below is a summary of reasons why cybersecurity insurance is important for any business and why you should consider getting on inasmuch as it's not a legal requirement.

•Helps mitigate the losses incurred both financially and socially in the event of an attack

•The liability coverage protects your business from further risks of cyber events such as cyber terrorism

•Legal expenses levied from privacy violations are covered

•The insuring company restored identities for customers whose private information was compromised

•Meets the extortion demands from a ransomware attack

•Handles all public relations after an attack and cushion you from the general public’s

wrath

•Protects your customers and any other key shareholder in your organization in case an attack harms them

Factors to consider when choosing a cybersecurity Insurance provide

Having bagged all that information explaining what cybersecurity insurance is and the facts and myths concerning it, you now stand in a better position to make wiser choices when purchasing any insurance policy. Below is a list of the top 5 things you should carefully study and reconsider before accepting any policy terms.

1.Does your coverage protect your data wherever it resides?

In this current age, a lot of company information resides on cloud storage and on mobile devices as supposed to within an organization's premises. Some insurance policies cover data on these locations, and some don't. Therefore, it is important to clarify this aspect of coverage since it's a non-negotiable variable in your decision- making.

2.Regulatory Defence and Fines

The process of navigating and surviving an attack is stressful and costly. Cyberattacks happen every day, and they impose a huge expense to recover from. Large data breaches will need organizations to march to courts, and this will require an excruciating amount of money to cover defence fees and regulatory fines. Proper holistic insurance coverages will be able to cater to regulatory investigations and actions. On the other hand, you should confirm the extent of a policy's coverage, and if there are any exceptions in place, you should weigh them first before you make a committing decision.

3.Exclusion Clauses

An exclusion clause is a policy provision that eliminates coverage from certain types of risks. Considering how cybersecurity insurance is relatively new and new threats and risks emerge every day, it gets a little bit confusing to describe what a particular policy has excluded. Standard exclusions in cybersecurity insurance are patent and copyright infringement, failure to implement standard security measures, and vicarious liability. It would be best if you were keen and critical when studying a policy's exclusion clauses.

4.Public Relation Expenses

The manner in which a breach is publicized and informed to the public, especially the customers, is crucial for an organization's redemption for both its clients and reputation. The insuring company usually covers the cost of breaking this news to the public, and you should ensure the policy you are deliberating on covers that aspect.

5.Forensic Expenses

Your organization has already fallen prey to the wrong hands, and harm has been done. The next reasonable step is to try and find the culprits liable as well as investigate what happened and what data has been compromised. It should be within your coverage policy to cater to your expenses as you outsource a forensic team. Thus, if a cyber insurance policy fails to cover a forensic team's extra cost, it may not be a good option to go for.

6.Budget Constrains

Before your organization settle on a given insurance policy, it is necessary to consider financial requirements verse coverage limit. For instance, if the average price to restore a data breach is $150 per stolen file. Before making a purchase, you should ask yourself whether the insurance coverage limit per lost record will be higher or less than the $150 mark. If it's less, it implies that the insurance compensation amount required to fully recover the lost data will not be enough. From this, you can make a decision that lessens the financial burden to your organization.

Conclusion

Cyber insurance is probably one of the top security measures each organization, big corporations, and Small and Medium Enterprises (SMEs) should look up to when it comes to a cybersecurity data breach. Cyber insurance transfers the risks to the insurance provider. However, it does not qualify to be an ultimate defense against major cyber attacks rather a complement of existing well cybersecurity posture (anti-virus) and program.

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