Remote work became common in 2020, and many companies found their existing security protocols insufficient for the new normal. The pandemic-driven rush to working from home happened before companies could prepare, leaving sensitive information at risk.
As a result, rates of cybercrime rose sharply in 2020, are still rising today, and likely will keep rising in the future.
One challenge to that new reality: most business insurance policies don’t cover data breaches — so “cyber insurance” is quickly becoming popular.
As the name implies, cyber insurance is insurance that specifically covers cybersecurity incidents. These policies often cover costs such as technical efforts to recover lost data, repair of damaged equipment, notifying affected customers, and even professional help from lawyers or other advisers.
Cyber insurance is not, however, a cure-all, and it’s not necessarily a worthwhile expenditure for every company. If you’re considering cyber insurance coverage, you’ll need to evaluate numerous factors to determine whether it’s the right choice for your organization.
The Benefits & Disadvantages of Cyber Insurance
The primary benefit of cyber insurance is coverage in case of emergency. Knowing that this safety net exists can bring peace of mind to your stakeholders and board members. Future clients may also feel reassured to know that if a cyber incident does happen, a mechanism is in place for recompense for stolen customer information.
Cybersecurity insurance firms also frequently provide resources and additional assistance when breaches occur. Legal guidance and referrals for specialists can be invaluable for companies that are otherwise unprepared for the severity of a breach.
Finally, cyber insurance policies can help to create awareness for cybersecurity needs at your organization and strengthen your overall security program. That said, it’s still important that you not become complacent, since insurance is not a replacement for a robust cyber risk management system.
The Limits of Cyber Insurance
Cyber insurance is not a perfect solution. While most insurers cover basic security breaches, insurance claims usually won’t cover loss of intellectual property or the public relations issues that may result from a cyber event. There are likely to be repercussions for security failures that you will need to handle yourself, and relying exclusively on insurance can still leave your business facing nasty surprise costs and consequences.
Additionally, some insurance companies may want to dictate ways you should respond to a breach, which your organization may find restrictive. Your insurance company may also require you to use its approved vendors and legal teams even if you would prefer to use your advisers.
Pricing in cyber insurance is inconsistent, but overall insurance premiums are rising. Attacks are becoming more frequent and more effective, and since the cyber insurance market is a relatively new field, there can be large discrepancies between what you pay and what benefits you receive. This makes it difficult for small businesses to become insured.
The Downside to Cyber Insurance
There is some debate amongst cybersecurity professionals about whether cyber insurance actually encourages ransomware attacks.
Such attacks have increased over the last several years and the ransoms themselves are rising steadily in price. Some people argue that having an insurance policy in place tempts companies simply to pay the ransom demanded by the hackers — which may encourage cybercriminals to target that company again in the future. Most security professionals advise against paying ransoms, since hackers will then have more money and resources for additional attacks.
Proponents of insurance argue that it’s always the business owner’s choice whether or not to pay the ransom, and that many will choose to pay because that might be easier and cheaper than rebuilding a damaged IT network.
Many insurance providers have decreased their coverage for cyber-based extortion (read: ransomware attacks) to discourage organizations from paying the ransoms. Some have also added coverage exclusions for foreign enemies to dissuade their customers from cooperating with cyberterrorists.
If ransomware is a particular concern for your company, don’t assume you’ll be covered. Instead, create a strong defense against hackers and malware to keep breaches from occurring.
ZenGRC Can Help You Prevent Cyberattacks
Cyber insurance is a worthwhile option to consider, but it can’t be your entire strategy. Your best approach is to build strong defenses against attacks whether you’re insured for them or not.
Staying on top of threats can be challenging no matter the size of your company, and increasing scale often brings decreased transparency into your risks. How can you make sure that all threats are accounted for?
ZenGRC is a risk and compliance solution that makes tracking and analyzing threats throughout your company easier than ever before. ZenGRC provides a clear view of your company’s threat landscape and includes automation and integration that will help you prevent cyber threats before they can strike. Schedule a demo and learn more about how ZenGRC can help you build a strong first line of defense for your company’s data.