In today’s data-driven environment, many organizations consider their digital assets as valuable as their physical ones—often even more. As a leader, especially if you are a business owner, CEO, CIO, or CFO, imagine waking up to discover a data breach or ransomware demand that could cost millions of dollars. Can your balance sheet handle that hit? Many want to be sure they can take the hit and opt for cyber insurance. No matter the size or location of your business, it is no longer a nice-to-have but a crucial line item in any cybersecurity budget. Let’s take a high-level look at some cyber insurance facts.
Fact 1: Most standard insurances won’t cover a dime of cyber-attack damages.
For that, you need cyber insurance, also known as cyber liability or cyber risk insurance. It’s designed to help organizations protect themselves from financial and reputational harm due to cybersecurity incidents, including data breaches, ransomware, and supply chain attacks, and coverage can include coverage for losses due to downtime, legal fees, fines, and other recovery costs.1
As cyber threats have grown in complexity and frequency, the need for more robust cyber insurance options has also expanded. The global cyber insurance market size was valued at $13.33 billion in 2022 and is projected to grow to $84.62 billion by 2030.2
Fact 2: Relying on cyber insurance without strong cybersecurity is like using an umbrella with holes in a storm.
While cyber insurance provides financial protection after a breach, it’s not a replacement for robust cybersecurity measures. Insurance should complement, not replace, a company’s cybersecurity strategy. During the underwriting phase, cyber insurers conduct intense evaluations of organizations. Firms lacking fundamental cyber security measures—such as multi-factor authentication, frequent vulnerability patching software updates, and consistent staff training—may find themselves denied by insurers.
Fact 3: There is more than one type of cyber insurance coverage, but you might need both.
- First-party cyber coverage protects against direct financial losses related to a security incident. It usually covers expenses associated with legal consultations on notification and regulatory duties, data recovery or replacement, customer alerts and related call center services, lost revenue from business disruptions, handling public relations during crises, dealing with cyber threats and fraudulent activities, probing the breach through forensic services, and addressing any fees or penalties arising from the cyber event.
- Third-party cyber coverage offers protection against claims brought by a third party. It often encompasses payments to those affected by data breaches, covering expenses related to claims, settlements, and lawsuits. This insurance also addresses losses from defamation and copyright or trademark infringements. Additionally, it may cover costs associated with legal proceedings and responses to regulatory inquiries, including accounting expenses, other settlements, and damage judgments.
Fact 4: Not every policy covers every scenario.
There are exclusions and limitations. Like all insurance policies, cyber insurance policies may have exclusions or specific criteria defining a valid claim. It’s essential to understand these terms thoroughly. Do your due diligence and ensure you know what’s covered and what’s not.
Fact 5: You can’t go back in time.
Cyber policies exclude losses arising from a breach or event that occurred before a specific “retroactive date,” often the original inception date or coverage purchase date. This is important because data breaches can go undetected for a long time. Your business won’t be covered, even if you discover them after purchasing the policy.
Fact 6: Insurance companies want to support you.
Many policies offer incident response, which can include breach coaching, PR support, or access to legal teams specializing in cyber incidents. This assistance can be invaluable during a crisis.
Fact 7: Insurers won’t likely issue a policy without a cybersecurity posture deep dive.
Before offering a policy, they typically assess an organization’s risk profile. This valuation can include evaluating a company’s IT security posture, policies, and protocols. Insurance providers will often determine premiums based on this assessment. Regularly improving your cybersecurity practices can lead to more favorable premiums.
Fact 8: Organizations must stay cyber vigilant.
Cyber threats evolve, so you must analyze your cyber defense technology regularly. It’s crucial to adjust your coverage as new threats emerge and the business environment evolves. Don’t simply set and forget your insurance plan.
Fact 9: Cyber incidents can lead to regulatory fines and legal fallout.
Ensure your coverage includes protection against regulatory penalties, especially if you operate in a heavily regulated industry like healthcare or finance.
Fact 10: Cyber insurance premiums vary widely.
Depending on an organization’s size, type of data handled, industry, current security posture, and desired coverage limits, costs vary. In 2022, U.S. cyber insurance premiums rose by 50% due to a spike in ransomware attacks and the growth of online commerce, boosting the need for coverage.3 However, recent data indicates that cyber insurance rates dropped around 10% in June of this year compared with last year, reversing the sharp rate hike.4
It’s an evolving marketplace, but cybersecurity insurance is integral to a comprehensive cybersecurity strategy. By understanding the nuances and continually aligning coverage with your risk profile, you can ensure that you are adequately protected against the ever-changing threat landscape. Understand your technology and your business, and talk to the insurance companies (most major carriers offer cyber liability insurance), a broker specializing in cyber liability insurance or even your managed security solutions provider (MSSP) for guidance.