In its infancy, cyber insurance was considered an unnecessary coverage addition for most businesses. It was generally deemed essential only for information technology companies responsible for managing networks and systems used by other businesses and consumers. In today’s digital age, cybersecurity insurance has become vital to organizations’ risk management strategies regardless of their industry. As cyber threats have exponentially grown in volume and severity, so have the complexities of navigating the cyber insurance landscape.
What is Cyber Insurance?
Also interchangeably referred to as cybersecurity insurance or cyber liability insurance, cyber insurance is specialized coverage that can help organizations get back on their feet after a cyber incident. When selecting a cyber insurance policy, it’s crucial to understand what is covered and what is not. Typical cyber insurance policies include coverage for expenses related to first parties and claims by third parties.
First-party coverage protects your business from direct losses due to cyber incidents.
- Data Breach Response covers costs related to managing and mitigating a data breach, including investigation, notification, and crisis management.
- Business Interruption compensates for lost income and operating expenses if a cyber event disrupts your business.
- Cyber Extortion covers ransom payments and negotiation costs in cases of ransomware or similar cyber threats.
Third-party coverage protects against claims by others affected by a cyber incident involving your business.
- Network Security Liability covers legal and settlement costs if your business is responsible for a security failure that leads to data breaches or system intrusions.
- Privacy Liability covers claims related to violations of privacy regulations or mishandling of personal data.
- Media Liability covers legal expenses and damages if content published by your business infringes on intellectual property rights or causes defamation.
One critical aspect of understanding cyber insurance is grasping what it is not. Cyber insurance isn’t a catch-all solution to your cybersecurity issues. It can’t prevent breaches or detect attack attempts.
Assessing Your Need for Cyber Insurance
Deciding whether your business needs cyber insurance depends on several factors. Key considerations to help you determine if cyber insurance is necessary for your organization include:
- Nature of Your Data: If your business collects, stores, or processes sensitive information, such as personal data, financial records, or intellectual property, you are at risk of cyber threats and could benefit from cyber insurance.
- Compliance Requirements: Certain industries and regulations may require your business to have specific cybersecurity measures and insurance. Understand these requirements to ensure compliance and assess the need for cyber insurance.
- Business Size and Industry: While it’s a common misconception that only large corporations are targets for cyber attacks, small and medium-sized businesses are increasingly becoming victims. Regardless of your business size or industry, you’re at risk if you’re connected to the internet.
- Cybersecurity Posture: Evaluate your existing cybersecurity measures. If your business lacks robust cybersecurity defenses, cyber insurance can provide extra protection. However, remember that insurance is not a substitute for good cybersecurity practices.
- Cost-Benefit Analysis: Consider the potential costs of a cyber incident, including downtime, legal fees, and reputational damage, against the cost of a cyber insurance policy. Insurance might be a prudent investment if a cyber incident’s potential financial impact is significant.
How Much Does Cyber Insurance Cost?
TechInsurance says the average cybersecurity insurance premium is about $145 per month or $1,740 annually. Exact costs can vary widely, however, depending on a handful of key factors.
- The amount of coverage needed: The types and the volume of data an organization handles across its networks and systems are the most important factors in determining the amount and pricing of necessary cyber insurance. Costs should be lower for businesses that store minimal data, for example, compared to those dealing with large volumes of sensitive information. Storing customer credit card numbers, social security numbers, or other personal information puts organizations at a much higher risk of cybercrime activity. Policies requiring higher coverage limits will also incur higher premiums.
- An organization’s size and headcount: The more individuals with access to sensitive data, the more likely a malicious insider threat or inadvertent human error could cause a breach. More endpoint devices mean more access points and attack vectors for savvy cybercriminals.
- Security posture and existing cyber defenses: In addition to access controls or practices to keep devices updated and software patched, having robust cybersecurity infrastructure and internal security processes that mitigate risk will help organizations save on cyber liability insurance costs. Insurers often thoroughly assess organizations’ technical, procedural, and human controls and may offer discounts for having recognized and reputable cyber defenses.
- A history of cyber claims or incidents: In the same way auto insurance premiums are higher for those with a track record of car accidents or driving citations, any previous cyber claims, successful cyberattacks, or breaches will lead to higher cyber insurance costs.
It is critical to remember that every cybersecurity policy is unique, with different terms, special conditions, and exclusions based on the organization’s needs, size, and risk profile. Ultimately, when assessing all relevant factors and influences, the level of risk a prospective policyholder presents determines an insurer’s pricing.
Choosing the Right Cyber Insurance Policy
To select the appropriate cyber insurance policy, consider the following steps:
- Understand Your Exposure: Identify the specific cyber risks associated with your business and industry.
- Compare Policies: Evaluate different policies and insurers, focusing on coverage scope, exclusions, and claims support.
- Assess Insurer Expertise: Choose an insurer with a strong track record in cyber insurance and expertise in your industry.
- Review Regularly: As your business and the cyber landscape evolve, reassess your coverage needs periodically.
RAMPxchange Helps Insure and Ensure Your Future
Navigating the cybersecurity insurance landscape can be complex. Find highly rated, peer-reviewed providers and knowledgeable professionals who can help guide your organization’s cyber journey in the RAMPxchange marketplace.