What is Cyber Insurance?
Cyber insurance covers a range of costs and risks related to cyberattacks. These include the costs and the liabilities of the insured business that it may have to pay to other people. The insurer will often require certain security practices and policies from your business, though you should normally view this as a benefit rather than bureaucracy.
Categories & Coverage
Because cyberattacks are largely digital rather than physical, it’s easy to underestimate the potential costs. These fall into two major categories: first party and third party. Many cyber insurance policies offer a cheaper option for first party cover only, though this may be a false economy with a first and third party policy a smarter choice.
First party risks cover the direct financial harm to your business. At the most basic this can cover the cost of restoring access to damaged systems and rebuilding networks. You must also consider the costs of lost business while systems are unavailable, for example, if you can’t process orders or staff cannot work. Other costs could include dealing with ransomware attacks or even directly losing money to online financial theft.
Third party risks cover losses that other people suffer and for which you are financially liable. This most commonly involves compensation and other costs if you suffer a data breach that harms customers, suppliers, or other people. In some jurisdictions, you may also have to pay for enhanced fraud monitoring for affected customers.
Depending on your business you could be liable for lost business and other costs incurred by customers, for example, if you supply software or online tools. (Your liability could vary depending on your terms and conditions and any service guarantees you offer.)
Cyber Insurance Benefits
A tremendous benefit of some cyber insurance policies is practical rather than merely financial help; an insurer may have access to experts in restoring access after an attack. This is beneficial because the quicker you are back in action, the fewer financial losses the insurer must cover.
Whether an insurer agrees to cover you, and how much they charge in premiums, will often depend on your security measures. This could involve completing a checklist, a little like applying for home insurance and saying if you have locks, alarms, security cameras, and so on, but with cybersecurity tools. Naturally, you must be entirely honest here to avoid invalidating your policy.
Alternatively, an insurer may want to assess your systems in person, often with annual checkups. This is something to welcome rather than fear as it’s an ideal way to find out about any shortcomings you may have overlooked.
Using cybersecurity consultants to audit or manage your security can be hugely beneficial when considering cyber insurance. The measures they take—and the fact you can show you are taking security seriously—can make a difference in the cover you can get and the premiums you have to pay.
Contact CPI Solutions today and we can advise on protecting your business through both insurance and security measures.