Cyber Insurance and Its Cyber Security Coverage Requirements in Today’s Digital Landscape
As a leading provider of technology solutions, Tabernacle Technology Solutions understands the importance of cybersecurity. However, in the face of escalating cyber threats, we also recognize the growing significance of cyber insurance.
The digital world has seen a significant surge in cybercrime over the past few years. Factors such as the rise of the cryptocurrency market, the COVID-19 pandemic accelerating remote work and cloud services, and geopolitical tensions have all contributed to a 38% increase in cyberattacks in 2022 alone. The cumulative cost of these attacks? A staggering eight trillion dollars.
The impact of a single successful cyberattack can be devastating for a company. From lost revenue and production to the cost of replacing affected hardware and software, the financial implications can be severe. Add to this the loss of consumer trust and potential legal fees, and it’s clear that without the safety net of cyber insurance, a business could find recovery an insurmountable challenge.
While cyber insurance doesn’t replace the need for robust cybersecurity measures, it does provide a buffer against the financial damage caused by incidents such as malware infections or data theft.
Who should consider cyber insurance? The answer is simple: any company that handles digital information. While large enterprises may seem like the most lucrative targets for cybercriminals, small and medium businesses with limited IT security can be equally attractive. Industries such as technology and financial services may be more at risk, but in today’s digital age, every company needs protection from digital threats.
The rising demand for cyber insurance is a testament to the growing awareness of this issue. A survey by insurance provider Hiscox revealed that 41% of 5,400 businesses surveyed had a cyber insurance policy in place, an 8% increase from the previous year.
The cost of cyber insurance varies depending on several factors, including the strength of your cybersecurity measures, the types and amount of coverage included in your policy, and the size of your business. However, the cyber insurance market is volatile due to its relative novelty and the lack of long-term data. As a result, premiums have been rising rapidly, and insurance providers are reevaluating the forms of coverage they offer.
Some leaders are even questioning the long-term longevity of underwriting such policies, as Zurich’s CEO Mario Greco recently made a startling claim that cyber insurance may be "uninsurable."
In response to the growing threat of cybercrime, President Biden’s new cybersecurity strategy includes plans to explore a potential federal cyber insurance backstop. This government support could provide certainty to the insurance market, making it easier for businesses to find adequate coverage.
Is cyber insurance worth it? That’s a decision each business must make based on its size, industry, and reliance on web-based tools and services. However, it’s worth noting that the potential cost of a cyber incident can be much higher than anticipated. According to the Hiscox Cyber Readiness Report, the average cost of a cyber incident for businesses with 50 to 249 employees is $184,000, and for companies with 250 to 999 employees, it’s $715,000.
Now, let’s delve into the requirements for cyber insurance coverage. Insurance providers will carry out a cyber insurance risk assessment as part of their underwriting process to determine your premium, coverage limits, and whether you qualify for cyber insurance. This process can range from a self-assessment questionnaire to third-party audits carried out over multiple weeks by a cybersecurity firm. Regular check-ups and reassessments are also possible.
To qualify for cyber insurance, policyholders are required to meet basic IT security standards. These include employee cybersecurity training, up-to-date antivirus software on all PCs, central patch management, network protection using a firewall, regular data backups, vulnerability scanning or penetration tests, endpoint protection and intrusion detection, active management and routine auditing of user accounts and permissions and securing admin and other privileged accounts using multi-factor authentication.
Insurance providers are increasingly strict about enforcing these security requirements, with many now demanding independent audits or official certifications such as ISO 27001, SOC 2 Type 2, or NIST CSF compliance. Failure to meet these requirements can result in claim denial and increased risk.
Improving cybersecurity not only helps prevent attacks but can also lower your insurance premiums. Your provider may suggest improvements based on your initial risk assessment. Remember, any security system is only as strong as its weakest link. Employee education often plays a major role in ensuring that safety standards are followed within your organization.
In conclusion, as we navigate the digital landscape, cyber insurance is becoming an increasingly important tool in our cybersecurity arsenal. It provides a safety net that can help businesses recover from the financial implications of a cyberattack, making it a worthwhile consideration for any company operating in today’s digital world.
About the author:
Logan Edmonds
CEO & Chief Security Officer at Tabernacle Technology Solutions
Logan specializes in advising small to medium sized businesses on the best avenues and practices of managing their risk as it relates to protecting their bottom line from cyber-attacks. He is the best-selling author of "The small business owner's guide to protecting your business from hackers."