In recent years, cybersecurity has become a necessity for organizations across a wide range of industries and sectors. From mom-and-pop shops along America’s main streets to Fortune 500 companies, all businesses are potential targets for cybercriminals. As a result, more corporations are investing in cyber insurance as a method to cover the rising expense of a cyber attack and protect their overall bottom line. Let’s take a look at the value of cybersecurity insurance, explore why it’s become such a critical component of many organization’s cybersecurity risk management strategy, and learn about the steps your organization can take now to be prepared.
Cyber attacks are on the rise
Over the past decade, cyber attacks have grown at outstanding rates. In 2020, the COVID-19 pandemic also greatly exacerbated the number of threats within the digital landscape with nearly 75% of security professionals claiming that their third-party-related cybersecurity risks increased after making the move to a remote workforce.
There are several key factors that are the driving forces behind the rise of cyber incidents, including:
- Increased exposure: In an ever-increasing digital landscape, software companies are writing more and more lines of code for companies of all sizes that can be utilized for cyber attacks.
- Hacker innovations: Cybersecurity technologies adjust their techniques after the threat happens, enabling hackers to modify their hacking techniques for optimum success. Cybersecurity providers take a reactive approach to attacks and cannot predict when new issues will arise.
- Elusive hackers: Hackers rarely phish where they live. Often, they hack across borders, making it nearly impossible for law enforcement agencies to catch them.
This all means one thing for the cybersecurity insurance market – it will skyrocket. In fact, a recent report by Androit Market Research suggests that the industry will grow from $4 billion to over $23 billion during the next six years alone as more firms invest in cyber protection.
What is cybersecurity insurance?
Cybersecurity insurance, also known as cyber risk insurance or cyber liability coverage (CLIC), is designed to cover a business’ liabilities in the event of a data breach involving sensitive data. This can include credit card numbers, Social Security numbers, and protected health information (PHI). In addition to covering legal expenses and fees, cyber insurance can help notify clients about a data breach, fix damaged computer systems, and restore the affected customers’ personal identities.
What does cybersecurity insurance cover?
In recent years, the cybersecurity risk insurance market has expanded to encompass two overarching types of policy coverage: first- and third-party written coverage.
First-party coverage is similar to commercial property insurance in that it covers the additional costs that an organization may incur in the event of an attack. This can include the cost of notifying customers, repairing damaged hardware or software, and general loss of income.
Third-party coverage can help organizations cover the costs that follow after a data breach occurs, such as lawsuits and other legal fees. This includes coverage around compliance and regulatory fines, privacy lawsuits, or breach of contract or negligence claims.
How much does cybersecurity insurance cost?
The cost of a cybersecurity insurance policy will be dependent upon a number of factors. Today, many insurance providers rely on metrics such as security ratings to underwrite policies and determine cost and coverage. Security ratings allow providers to gain a more complete understanding of your organization’s network and the various steps you are taking to protect critical data and assets.
Organizations can take advantage of this by monitoring their own cybersecurity posture on an ongoing basis. In addition to their impact on policy cost and coverage, security ratings can help your organization identify vulnerabilities and determine what needs to be done to improve cyber hygiene. Additionally, continuously monitoring your posture with security ratings can help your organization ensure that it is maintaining compliance with required mandates, in order to cut down on unnecessary costs.
Do I need cybersecurity insurance?
What businesses need cybersecurity insurance? The short answer is every business. All types of commercial entities, including not-for-profit organizations, corporations, educational and financial services institutions, can benefit from having cyber insurance if they collect, process, and store financial or personal customer or employee data.
This sensitive information makes both small and large companies potential targets. All it takes is one successful attack to cause a costly breach of data.
Some reasons you should consider getting cybersecurity insurance include:
- Cyber incidents happen often: According to a recent Argo cyber insurance survey, almost two-thirds of small and mid-sized enterprises (SMEs) have suffered a cyber attack.
- Data is more valuable than oil: Data reigns supreme in today’s economy. It can result in increased revenue, cost savings, and efficiency. However, it isn’t covered by standard property insurance. Cyber insurance offers coverage in the event of a data breach.
- Your electronic system isn’t covered: If a ransomware attack occurs, your electronic system downtime will not be covered by run-of-the-mill business interruption insurance. Cyber insurance fills in the gaps and covers lost profits associated with a cyber-related systems outage.
The future of cybersecurity insurance
The cybersecurity insurance sector currently covers a small percentage of losses that businesses incur after a cyber attack. However, the rise in malicious cyber activity has the cost of a data breach at nearly $4 million, making it evident that cybersecurity insurance needs will substantially increase.
The cyber insurance sector is trending upward and technologies are evolving at a lightning-fast pace. Regulation trends, the development of cyber risk pools, and increasing awareness about cyber risks will all aid in the bright future of this industry.
How SecurityScorecard can help
Cybersecurity insurance is essential for companies of all sizes. Not only does it help businesses to mitigate risk exposure by offsetting the costs associated with a cyber attack, but it also helps to notify customers and employees in the event of a cyber incident. If you are a business owner, now is the time to invest in this critical insurance.
In order to cut down on unnecessary costs and guarantee that they are getting the best coverage possible for their needs, organizations should leverage objective cybersecurity measures such as security ratings to monitor their entire IT ecosystem. By ensuring that your organization is not only compliant but proactive when it comes to mitigating risks, you can help underwriters and providers to gain a clearer understanding of your organization and its needs when it comes to cybersecurity insurance.
The rise in cyber attacks has put a clear emphasis on the need for effective cybersecurity risk management, and cyber insurance is a critical component of that. Organizations should take the steps today to defend their critical data and assets from emerging threats.