We live in times where every type of organisation uses technology to do business, therefore faces cyber risk. As technology becomes more complex, so do the threats that both big and small businesses face. Data breaches and other cybercrimes are becoming more common these days and very often, they result in legal fees and major fines, not to mention stress. That’s why it’s a good idea to have your business prepared with cyber liability for managing and mitigating those risks and protecting your business assets.
What You Need to Know About Cyber Liability Insurance
Cyber liability insurance is an insurance policy that provides businesses with coverage options to help protect the company or organisation from cyber security issues, such as data breaches, for instance. It emerged onto the insurance scene as a result of the fact that other business insurance policies were not created to cover cyber risks.
Phishing emails, security breaches, computer system breakdowns, network security issues and malware are just some of the kinds of cyber risks that may cause serious liability or losses. Even with careful security measures applied, data breaches may occur. Cyber insurance may not be the first thing that comes to a business owners mind when considering insurance coverage for their firm, but it’s important for them to understand the threat of cyber attacks and the seriousness they carry.
The financial consequences of a cyber attack can be devastating for your business and are increasingly common these days. So, you want to make sure you get cyber liability that’s just right for your company or organisation and can help you recover from financial losses in case of a cyber-attack and data breach. A data breach can damage your business computer system, but also it can damage your reputation and put your employees and customers at risk, which is one of the main reasons why you need a smart precaution.
Since cyber insurance is new and emerging, policies may vary as most insurers use cyber insurance coverage forms that they’ve developed themselves. Many of them provide a range of coverages, some of which are automatically included and some that are optional. Most policies include the two main types of cyber insurance, first-party coverage and third-party coverage.
First-party coverage can help you cover expenses that impact your business directly when your systems or network are breached and/or your data is stolen. Most businesses use computers to send, receive and/or store electronic data and if it’s lost, damaged or stolen, it may be costly and difficult to restore.
First-party coverage can help you with all the related costs, so if you have found your ideal broker, make sure to discuss everything that your cyber insurance covers. Notifying customers of a data breach involving personal information can be a very expensive process, but it’s a gesture that goes a long way with public relations.
Third-party cyber insurance, on the other hand, can help you cover claims made by injured parties against your business or organisation. A data breach can trigger third-party claims or lawsuits, especially if personally identifiable information is involved, such as customer contacts, security numbers, credit card numbers, health records and more.
Beyond the basic cyber insurance coverages, there are many other coverage additions that may provide better coverage, especially for new buyers and situations that are not well understood yet. Social engineering is one example of these enhancements to a cyber insurance policy. Since phishing emails can do a lot of harm to your cash flow, social engineering is designed to protect businesses from fund transfer frauds.
Who Can Benefit from Cyber Insurance?
Any business can fall victim to a data breach, whether it’s a financial service provider, healthcare organisation, retailer or else. The loss, compromise or theft of electronic data can have a negative impact on a company or organisation and can lead to loss of clients and revenue.
Living in the time of the corona pandemic, we’ve learned a lot of things, and one of them is that cyber risks are more prevalent than ever before. Even before the pandemic, cyber insurers were asking for more details in order to fully understand the risk they are insuring. From details on backup procedures to questions on specific security controls in place, you can expect a rigorous underwriting process when it comes to your cyber insurance
However, the pandemic made entire workforces move from offices, where cyber security was more controlled, to their homes, where hackers can take advantage of a new security. This meant immediate challenges, such as bandwidth, unsecured connectivity, phishing, employee access issues and many other cyber risks. Luckily, cyber insurance policies were able to respond and today, they have advanced from a niche risk transfer tool to an essential requirement for risk management.
What Cyber Insurance Doesn’t Cover?
Understanding what your cyber insurance covers and excludes is very important, and even though there are different cyber security coverage options, generally they don’t cover incidents that occurred before the policy went into effect, infrastructure failures that are not caused by a purposeful cyber attack, poor configuration management or mishandling digital assets, acts initiated by the insured, loss of or damage to property, like physical assets covered by property insurance, costs incurred to improve cyber security after an attack or data breach, expenses beyond the policy’s coverage limits, and more.