2023-11-24 13:01:25
Knowing that liability insurance only covers property damage and bodily injury, the company needs cyber security insurance to cover the damage caused by a data breach. Cyber insurance includes reimbursement for financial costs related to the attack, restoration of compromised data, and advice on strengthening security.
Cyber security insurance is becoming a necessity for all businesses with online activities. Despite the use of sophisticated tools and the implementation of prevention measures, they do not definitively eliminate the risk of attacks. Hence the need to take out cyber insurance. This contract protects them once morest all the financial consequences of a violation: payment of a ransom, restoration of data, experts’ fees, payment of fines, etc. This precaution is aimed at all companies of all sizes, knowing that an attack does not only target large groups. SMEs/VSEs have also been targeted by hackers in recent years.
Why take out cyber security insurance?
The theft or compromise of digital data generates a significant financial loss for the victim company. According to a report from IBM Security, the average cost of a cyberattack is $4.35 million.
This cost includes the ransom, regulatory compliance, strengthening data security, technical audit, customer communication, etc. However, these are the visible costs uniquely.
Experts identify several hidden costs caused by the loss of confidence of partners, the loss of credibility with customers, the increase in insurance premiums, recruitment difficulties, etc.
Financial losses may be greater depending on the size of the business. Take the case of the hacking of Sony’s PlayStation network. In 2011, the Japanese firm spent $171 million to resolve problems related to this hack.
Remember that part of this sum might have been reimbursed by his insurer. However, the court ruled that Sony’s insurance only covers property damage. Hence the need to take out cyber security insurance in the current context.
What is cyber security insurance?
Insurers began to offer this offer towards the end of the 1990s. As its IT system becomes a major issue for the company, cyber threats are increasing. In its infancy, cyber security insurance only covers computer attacks and data theft. Over time, safeguards have expanded to include social engineering attacks, ransomware and cyber extortion, business interruption, system outages, and more.
Cyber security insurance presents similarities with errors and omissions (E&O) insurance. However, E&O insurance does not protect once morest the loss of customer data such as bank details for example. If the company handles sensitive information relating to its customers, cybersecurity insurance represents the best alternative.
Cyberthreat insurance covers all financial damage caused by a cyberattack. It might be ransomware, data breach or evencomputer attacks. The warranty may extend to communication with partners (customers and suppliers), legal costs as well as compensation claims, etc. The insurer can also include consultation and data recovery in its offer.
What risks are covered by cyber insurance?
Each cyber risk insurance offer has particularities depending on the guarantees offered. The more there are, the higher the price. It is up to the company to identify the offer adapted to its needs.
Cyber security insurance coverage generally falls into four categories:
Costs related to the violation
An intrusion into a company’s computer system can generate significant financial losses. Let’s take the example of a structure that is the victim of ransomware, it must pay a sum requested by the hackers to restore its files. According to The State of Ransomwares 2022 from Sophos, 46% of French companies victims of data theft paid the ransom.
On their side, Ddos attacks paralyze the company’s data center for a while. This outage makes the organization’s website and applications inaccessible. This type of attacks has occurred 13 million times in 2022 worldwide. Beyond the consequences on turnover, attacks can lead to non-compliance with the contract between the company and its customers. Fortunately, cyber security insurance includes it in its coverage.
Costs related to legal fees
A cyber attack can also affect the organization’s partners. Hackers leak customer data on the dark web. They access the servers of these partners through a vulnerability in the targeted organization. In all cases, the victim of a cyberattack may be subject to prosecution. She exposes himself to investigations and incurs fines.
However, all these steps generate costs. The company may be required to pay compensation, reimburse its customers, etc. Cybersecurity insurance covers these costs.
Communication costs
Following a violation, the victim company must implement a communication strategy aimed at inform your employees and customers. If its activity requires it, it can even set up a support center.
Recovery costs
An organization must react to recover its data and restart its activity following a cyberattack. She can request help from a cyber security expert to assess the scale of the attack and identify compromised data. The latter puts in place measures to strengthen the security of the computer system in order to avoid further intrusions.
Regulatory obligations may also impose the launch of an independent investigation. In this case, the fees of these experts are covered by the insurer.
Incidents excluded from cyber security insurance
The insurance policy does not cover events prior to its subscription. The contract does not also cover employee-initiated data theft of the company. THE computer failures can occur, with or without a cyberattack. In the event of a breakdown without malicious intent, the insurance does not cover the financial costs.
If the company already aware of the flaws in its system and they have not been corrected, the insurer may refuse reimbursement in the event of an attack. In the other case, if it hires a cyber security expert to strengthen its system and upgrade its technological tools, the costs are not covered by insurance. Finally, cyber security insurance does not reimburse loss of turnover following the attack. The warranty does not cover loss of value of intangible assets disclosed following the attack as well.
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