Cyber Security

If an organization relies on digital networks to store its data, there is no guarantee of its security without proper cybersecurity management.

Even with cybersecurity measures in place, a company can still be vulnerable if not properly managed, making it easier for attackers to breach the system. This is why cyber insurance is often essential for most organizations.

If you want to learn more about cyber insurance and how it functions, continue reading below!

What is Cyber Insurance?

Cyber insurance generally works just like insurance, with a contract between enterprises and an insurance company. This contract is acquired to reduce risks associated with online activities, specifically related to cyber liability. When a company faces a cyber attack or many types of data breaches, this insurance helps cover the costs and losses incurred, which usually cost a lot, so it helps lessen the company’s responsibility to cover costs from a cyber crime.

Origins of Cyber Insurance

Cyber insurance services have been around since the 1990s and have helped many companies. Initially, this insurance only covered data breaches and computer attacks. However, as time has passed, it has expanded to cover various cybercrimes, such as ransomware.

Cyber insurance is rooted in errors and omissions (E&O) insurance, which protects against mistakes and shortcomings in the company’s services. Some cyber insurance policies may cover E&O provisions, but most providers offer E&O insurance as a separate policy. E&O insurance does not cover third-party data loss prevention, so customers who need this type of protection can purchase an insurance policy that includes coverage for it.

How Does Cyber Insurance Work?

Cyber insurance protects businesses against financial losses and liabilities resulting from cyber security threats. These policies are typically sold by the same providers that offer related business insurance, such as errors and omissions (E&O) insurance.

Most cyber insurance policies include two types of coverage:

1. First-party coverage: This applies to losses that directly affect the company, such as expenses related to data breaches, ransomware attacks, or other cyber incidents. It can help cover costs like data recovery, business interruption, and extortion payments.
2. Third-party coverage: This applies to losses suffered by others due to a cyber event involving the company, such as customers affected by a data breach. It can help cover legal fees, settlements, and damages.

This insurance can also assist in covering the expenses linked to cybersecurity risk management, like putting in place security measures to prevent future incidents.

What Does Cyber Insurance Cover?

As mentioned earlier, cyber insurance initially only covered data breaches and computer attacks. However, it now covers most cyber threats and losses that can have a negative impact on a business.

Cyber insurance can assist with:

• Expenses related to restoring the personal identities of affected customers
• Legal expenses
• Costs related to recovering compromised data
• Costs for repairing any damage to compromised computer systems
• Notifying customers about potential data breaches

What isn’t Covered by Cyber Insurance?

While many insurance companies offer various coverage options, there are cases where this insurance cannot cover specific incidents. Here are the examples:

1. Any breaches or cyber events that happened before you bought the policy
2. Costs to improve your company’s technology, like getting new apps for better security
3. Cyber events caused by employees or people within the company
4. If you don’t fix known problems, your coverage might not work
5. Infrastructure failures because of things outside the company’s control, not cyber attacks

Who Needs Cyber Insurance?

When a company stores data in a network system, an insurance becomes necessary to protect against potential cyber threats. However, refer to the list below for specific cases where this type of insurance is needed.

Companies with high revenue

Most cybercriminals operate for financial gain, making companies with high revenue attractive targets. This is why a strong cybersecurity team is insufficient for a large company; they also need cyber insurance, as attackers can continually evolve their tactics to hack into the system.

Government agencies

Government agencies often collect a lot of private information from citizens to function effectively. However, this data is tempting for hackers because it can be sold for a high price. That’s why they should have cyber insurance in addition to solid cybersecurity measures.

Financial institutions

Financial institutions are also attractive targets for hackers because they deal with money and their customers’ personal information. Hackers see them as lucrative targets due to the potential for large financial gains and access to valuable data. As a result, financial institutions should consider this insurance to protect themselves and their customers.

Educational institutions

Just as the government collects data on citizens to operate, educational institutions also gather large amounts of personal data, primarily related to students and staff. This data is tempting for cybercriminals, and having cyber insurance could help them mitigate the financial impact of a data breach or cyber attack.

Healthcare providers

Healthcare organizations store many private and sensitive patient information, including medical histories, test results, and billing information. Therefore, they should consider getting this insurance to protect this information.

Businesses of all sizes

Businesses, regardless of size, are vulnerable to cyber attacks, particularly as many have digitized their operations and stored sensitive data such as customer names and contact information online. Therefore, investing in this insurance type can significantly benefit a business, especially small businesses, by providing financial protection.

Frequently Asked Questions

Conclusion

Cyber attacks can result in significant financial losses due to various factors. Therefore, businesses and individuals must take proactive steps to protect themselves from cyber threats, and getting cyber insurance is one way to do so.

By getting this insurance, a business can be financially protected against the costs of a cyber attack. It can provide peace of mind and help companies to recover quickly. However, it cannot stand alone as protection because a business also needs proper cybersecurity, and you can get it by getting in touch with Fluxgate today!