CYBER INSURANCE | 5 MIN READ
Cyber insurance, also known as cyber liability insurance, covers your business in the event of a cyber attack or data breach where customer information is impacted. Cyber attacks threaten your business' livelihood and the costs to properly mitigate said attack can quickly add up. Thankfully, a cyber insurer can help. Keep reading to learn more about cyber insurance and how to decrease costs.
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What Is Cyber Insurance?
As stated above, cyber insurance covers your business in the event of a cyber attack or data breach where customer information is impacted.
Cyber attacks, which can range from malware attacks to ransomware attacks, can have a drastic financial impact on your business. When your company's network is breached, the time and money needed to regain control of your network, secure sensitive data, and restore customer confidence can quickly add up.
Cyber insurers shoulder some of the financial burden for you, allowing your business to resume operations without a drastic impact to your bottom line.
When you file a claim, your insurer can assist in notifying customers about the breach/cyber attack and can help cover the costs of recovering compromised data and repairing your network.
Some insurers even offer credit monitoring services and identity recovery protection to restore consumer confidence in your business.
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Understanding Your Coverage
When it comes to cyber insurance, there isn't a "one size fits all" approach. Based on your company's needs, you can usually customize your coverage as needed.
What does a cyber insurance policy cover?
Cyber insurance typically covers first-party and third-party claims. First-party coverage is when your business is affected by a cyber attack, for instance a ransomware attack or data breach.
Coverage for first-party claims could include costs to recoup damages to your network, notify customers whose data has been breached, and more. Many states have passed legislation requiring companies to notify all residents whose personal information has been inappropriately accessed.
If the data of many customers has been accessed, the costs of notifying them all quickly add up. Financial assistance from your insurer in this scenario is helpful.
Third-party coverage typically extends to lawsuits and penalties for violations of data regulations. For instance, if you experienced a cyber attack due to negligence, a customer whose data has been breached could have grounds to sue you. A cyber insurer could assist in covering the costs associated with this lawsuit.
How is a cyber insurance policy built?
When deciding what kind of policy you want to build, consider what types of scenarios you want to be covered for and if you want a packaged policy.
As we touched on earlier, cyber insurance policies can cover a range of first-party and third-party scenarios. When building a policy, you can typically customize it to have all-inclusive coverage over most scenarios, or a la carte coverage that only covers scenarios of your choosing.
Additionally, sometimes your insurer will let you package a cyber insurance policy with, for instance, a property insurance policy, which can save you money.
What will my premium and deductible be?
When reading over a cyber insurance policy, the costs for a premium and deductible are top-of-mind. Cyber insurance premiums and deductibles are determined by a myriad of factors.
Your premium may be higher if you store more Personally Identifiable Information, your exposures are higher, your revenue has increased, or if you aren't that compliant with data regulations like PCI DSS.
Your deductible may be more expensive if your claims history is high or your number of claims increases.
How to Decrease Your Cyber Insurance Costs
Consider A La Carte Policies
Cyber insurance policies can usually be customized for all-inclusive coverage of a wide range of scenarios or be built a la carte.
All-inclusive coverage may protect against everything from a small network outage to a large-scale ransomware attack, while a la carte models allow you to choose a few scenarios that you think your company needs coverage for. A la carte policies can save your business money since your coverage extends to a smaller amount of scenarios.
When analyzing an a la carte policy to maximize cost efficiency, pay close attention to the deductible and compare it to the cost of any past cyber attacks your company has had.
For instance, if your company has experienced multiple small attacks costing $10,000 or less to resolve but your deductible is $15,000, then you may want a policy that only covers costly events such as ransomware attacks, seeing as it wouldn't be worth it to pay the deductible for small attacks.
In an a la carte policy such as this one, your premium may be cheaper and your deductible will give you more bang for your buck. If your company is prone to small-scale cyber attacks, paying an expensive deductible and filing a claim every time this happens will only hike your premium moving forward.
Reduce Your Exposures
Insurance companies use your exposures to evaluate how likely it is that you'll have to file a claim. Exposures are also used to determine your premium. By lowering your exposures, you show your insurer that you pose less of a financial risk to them, which could persuade them to lower your premium.
One way to reduce your exposures is to invest in strong cyber security. A secure network can prevent cyber attacks, lessening the need to file a claim.
The less claims you file, the more of a chance that your insurer will refrain from raising your deductible, seeing as claims history is a big factor in deductible costs.
To secure your network, consider upgrading your network's hardware and software. Having the latest firewall, antivirus, and anti-malware is a great first step towards protecting your sensitive data.
Additionally, consider educating employees on cyber security best practices. Employees are your weakest link when it comes to a secure network − all it takes is a single employee clicking a link in a phishing email for a hacker to have access to your network.
When building a cyber security education course, be sure to include a password policy with tips on creating a secure password, as well as tips on how one can avoid falling for a phishing scheme.
Hire Managed IT Services
Cyber security insurance helps protect your business' financial health in the event of a cyber attack or data breach lawsuit. However, cyber insurance doesn't provide any technical protection to prevent network breaches and cyber attacks from happening in the first place.
A Managed Service Provider (MSP) manages your cyber security for you by implementing a variety of tactics to keep your network secure and maintaining a secure environment. This can prevent cyber attacks and data breaches, which will reduce your need to file a claim with your insurer.
Your deductible increases, in part, due to the amount of claims you file. When an MSP keeps your number of claims from increasing, this can keep your deductible from increasing, as it shows that your company continues to be a low risk to your insurer.
While an MSP can reduce your claims, hiring one can also reduce your premium. Hiring managed IT services shows your insurer that you're committed to reducing your exposures and protecting your network, which could persuade them to lower your premium.
An MSP protects your network by installing various hardware and software to keep your network up-to-date with the latest cyber security tactics. Additionally, an MSP can assist you in creating a password policy and list of cyber security best practices for your organization to ensure that employees don't fall for phishing schemes or leave your network open to breaches.
The right MSP will keep your insurance costs low while protecting your network from intruders.
Cyber insurance is increasingly becoming a top-of-mind consideration for businesses. Customizing a policy that fits your needs can help you manage any financial burdens that arise if your company experiences a cyber attack or data breach.
Posted by Erica Kastner
Erica Kastner is a lead Marketing Specialist at Standard Office Systems as well as a University of Georgia graduate. She aims to use her passion for problem-solving to help businesses understand how to better leverage their network infrastructure.