Posted on Mar 20, 2020
The technology that is currently driving business innovation is also attracting high levels of risk. As organizations continue to take advantage of the digital shift, they present more opportunities for cyber criminals to gain access to their network. No matter the size, it is virtually impossible to fully protect an organization from every existing threat. For this reason, cyber insurance is now a necessity more than it is a luxury.
Even the strongest networks can experience a data breach, and organizations need to be prepared to handle the fallout if and when it happens to them. Aside from lost data, breaches are a major financial pain point and the cost and time it takes to repair an organization’s reputation should not be underestimated. In fact, data suggests that cybercrime incidents cost businesses over $2 trillion in total in 2019.
In addition to a solid security program, cyber insurance is a must - even more so if the organization manages sensitive consumer information and data. Hackers are only getting smarter, which means it’s not always enough to follow cybersecurity best practices.
With the cost of a data breach on the rise, reaching an average of $4 million per breach in 2019, cyber insurance policies are essential to help companies offset the cost of recovery. This type of insurance allows organizations to transfer some financial risk to their insurer to help mitigate costs in the event of a security breach.
Cybersecurity insurance is a relatively new concept, so it can be difficult for providers to accurately assess an organization’s potential risk exposure since the industry doesn’t have the same historical data that other industries rely on to determine premiums and coverage. It’s up to organizations to assess their risk and do their part to protect themselves by clearly defining what is preventable and which threats are out of the company’s control. If a cyber insurance provider determines that an organization has not adequately defended itself against attacks, they may limit coverage or decide not to payout.
Many businesses incorrectly assume that their existing insurance will also cover cybersecurity. If your company gathers and manages sensitive customer information, stores data online, or collects payment information, then it is especially important to have a plan in place to cover potential losses while you work to mend the situation.
There are a lot of different factors that influence the cost and coverage of a cyber insurance plan, such as an organization’s industry, services or products offered, and current cybersecurity posture.
Insurance providers want to know that an organization is doing its part to protect against threats. During the application process, insurance companies will inquire about the programs and systems that are currently in place to ensure that the organization at hand is following cybersecurity best practices.
Common questions that will need to be addressed include:
Cyber insurance policies tend to be tailored and highly-customized due to the variety of factors listed above.
Cyber insurance providers require a lot of information to properly assess an organization’s risk exposure and ongoing security efforts. A security rating makes it simple for providers to quickly assess a prospect’s cybersecurity posture and gather data necessary to create and price policies. Insurance providers are able to see how an organization’s cybersecurity compares to competitors and others in the industry, which helps them separate high-risk prospective policyholders from low-risk prospects.
Additionally, comparing data across multiple organizations can help a cyber insurance provider better assess the extent and severity of a particular threat. Cyber insurance providers want to help organizations continue to improve their network security, and security ratings help to pinpoint any gaps or vulnerabilities that should be addressed.
These ratings also make it easy for policy underwriters to access information without having to rely on answers from the organization itself, saving time spent on back-and-forth communication between underwriters and security teams.
When cyber insurance underwriters have visibility into the risks facing an organization, they’re able to price policies more accurately. SecurityScorecard provides companies with a security rating ranging from letter grades A through F by evaluating their security risk across 10 groups of risk factors. Those with a security rating of A, B, or C typically face less risk and have demonstrated an ability to maintain their security posture. Those that received a rating of D or F are more likely to experience a breach due to negligence and ineffective security programs.
With an outside-in view of your network, underwriters can accurately and consistently assess a policyholder’s network, streamlining the insurance process. Furthermore, SecurityScorecard makes it easier for providers to stay on top of a policyholder’s cybersecurity efforts and practices to ensure that both sides are doing their part to protect the organization’s cyberhealth on a regular basis.
Check out our list of 3 top third party risk management (TPRM) challenges, and the actions you can take to bolster your program. Learn more.
Performing cybersecurity risk assessments is a key part of any organization’s information security management program. Read our guide.
Templates and vendor evaluations are needed to level that playing field, in a time efficient and fair way, so that the best vendors are chosen.
Co-founder and CEO, Alex Yampolskiy, speaks about the importance of measuring and acting on key indicators of cybersecurity risk.
You’ve invested in cybersecurity, but are you tracking your efforts? Check out our list of 9 cybersecurity KPIs you should track. Read more.
No waiting, 100% Free
Get your free scorecard and learn how you stack up across 10 risk categories. Answer a few simple questions and we'll instantly send your score to your business email.