As businesses continue to adopt more technology into their everyday workflows, they become more susceptible to cyber attacks. The cost of a data breach doesn’t stop at replacing equipment and repairing databases; it extends into customer's confidential data. When that happens, there are regulations in place that require customers be notified and debriefed that a cyber attack occurred.
How Does Cyber Insurance Work?
Organizations risk potential liability if customers' personal identifiable information (PII) and protected health information (PHI) become exposed due to a data breach. Cyber Insurance protects companies from that liability through both first-party and third-party coverage policies:
- First-party coverage is intended to cover the incident response such as the forensic investigation, protection services, and financial repercussions
- Third-party is intended to protect the policyholder from legal expenses associated with the incident including fines, lawsuits, and settlements
Why it Matters
Some small businesses neglect their need for cybersecurity thinking their organization will go “unnoticed” due to their small size. Unfortunately, this isn’t the case as many hackers will look at them as a "gateway" to a larger organization.
50%
Since the fall of 2019, nearly 50% of all cyber attacks targeted small businesses (who tend to feel the impact the most).
When small businesses do prepare, many overestimate their ability to handle and respond to an incident. Unfortunately, cyber attacks are becoming more sophisticated and good security requires expertise which generally means a dedicated IT team, which can be expensive.
Cyber Insurance Requirements
With each new policy, insurance providers evaluate the risk involved. So, it’s in a business’s best interest to represent a "good risk" for the most coverage. This evaluation is typically based on the cybersecurity controls that are in place. Insurance companies typically require certain precautions to be implemented prior to issuing coverage.
Typical Coverage Requirements:
- Multifactor Authentication (MFA)
- Secure Email Gateway (SEG)
- Endpoint Detection & Response (EDR)
- Segregated Backup Systems
Each of these actions significantly reduce an organizations cyber risk.
Limitations
Cyber Insurance can be a bit daunting when searching for the right policy for your business. Unfortunately, not all policies are the same - different types of businesses require different types of coverage. It’s important to understand your cyber insurance policy because it will influence how your organization responds to an incident. It’s also worth noting that cyber insurance coverage is not the same as security and data protection. Businesses need to continuously evaluate their security systems and take initiatives to improve their overall IT Strategy that correlates with an incident response plan.
Security is centered around what an organization is willing to accept as risk. Investments in security and incident response should be influenced by that decision. Regardless of the investments, they need to occur before the attack. It is the best way to protect your business and customers.
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