By Jannet Smith 
Introduction
For modern businesses nearly everything carries some degree of risk associated with a cyber attack. Traditional insurance usually does not provide adequate coverage in such cases and thus leaving businesses at high risk of financial ruin. This is where cyber insurance comes into the picture but is it really necessary? The changing landscape of cybercrime and inadequate traditional insurance and multiple benefits offered by cyber insurance are all covered in this essay. We shall analyze the costs involved and the need for a multi layered security approach to see how important cyber insurance becomes as a shield in the business environment.
The Evolving Threat
Technology is the fosterer of innovation and growth but also exposes the business concerns to an evolving landscape of cyber threats. Much like the digital world itself and these threats are in a flux and require ever vigilant defenses.
Gone are the days of malware attacks. The cybercriminals of today are very sophisticated adversaries armed with advanced tools and techniques. Some of the major concerns are ransomware attacks and in which data is encrypted and held to ransom and which will lead to operational cripple and monetary loss through operation downtime. Business email compromise scams are another fast growing cause of concern and in which an attacker may spoof a legitimate contact in order to trick a victim into transferring funds. They are very hard to detect since they prey on human trust.
It is no longer a monolithic population of attackers. Advanced Persistent Threats and state sponsored actors and or highly organized criminal groups have a very narrow target and usually one particular organization and over a long period of time for espionage purposes or data theft. These groups use advanced techniques against defenses and utilize previously unknown vulnerabilities to gain access to systems and zero day attacks.
Further and with the exponential increase in Internet of Things devices and new attack vectors are opened. Most of the interconnected devices are weak in security measures and turn out to be backdoors to break into any network. Growing dependence on cloud computing may also bring along certain vulnerabilities if proper care is not exercised in laying down proper security measures.
The changing landscape of threats poses a formidable challenge to business enterprise. Traditional security measures like firewalls and antivirus no longer work to protect against the new age attacks. Businesses can consider layering security with continuous monitoring and employee training and vulnerability management in order to keep themselves ahead. That said and even with the most robust defenses there’s still a risk of having a successful cyber attack. That’s when cyber insurance can provide very important protection in this ever changing digital battlefield.
The Escalating Cost of Cybercrime
The one thing that is crystal clear is that once a cyberattack hits it has huge ramifications that extend beyond that first breach. The business remains at the mercy of an escalating financial burden and scaled often to debilitating operations or forced closure. Breakdown of the rising cost of cybercrime
Direct Financial Losses
This includes money directly stolen from BEC scams and ransomware attack ransom payments and expenses for data recovery and forensic investigations.
Business Interruption
A cyberattack disrupts normal business activity and thereby sapping productivity and missing deadlines and causing a decrease in revenues. It may further result in legal liabilities for those organizations that permit the leakage of customer data.
Reputational Damage
A cyberattack might adversely affect the public image of the respective organization. As a consequence negative publicity will add to lost customers and a brand image maligned and a hard time gaining new business associates.
Regulatory Fines
Based on the industry and how bad the case is data breaches could bring in hefty fines from regulatory bodies. These add another layer of financial burden.
The true cost of cybercrime is often very hard to quantify. Beyond the immediate costs listed above businesses may experience long term consequences that include reduced customer loyalty and erosion of market share. Several reports paint a grim picture of the rising financial threat
Cybersecurity Ventures
Estimates global cybercrime costs to reach as much as $10.5 trillion yearly by 2025. For comparison that is from $3 trillion in 2015.
FBI Internet Crime Report
Shows cybercrime complaints year over year and with a steady and increasing arc. Sure and there are some bumps and dips but overall the trend is an increased rate of attacks and their related costs.
Together this increase in cybercrime cost places any sized business under severe threat. No longer limited to large business organizations and cyberattacks are rapidly becoming the common threat to small and medium scale businesses. Traditional forms of insurance policies usually don’t offer coverage against such evolving threats and thereby leaving companies rather ill equipped to face the financial storm of a cyberattack. Cyber insurance is therefore an investment crucial in protecting against financial losses by charting a clear route to recovery following a cyber breach.
The Weakness of Traditional Insurance?
Traditionally businesses have turned to insurance policies to limit risk as the nature of cyber threats changes. These traditional insurance products often fail in case of a cyber attack. In this section and there is a more in depth description of the limitations of traditional insurance
Limited Coverage
Traditional policies of insurance are modeled to address established risks such as fire and theft and property damage. In most instances cyber risk has not been expressly covered hence and companies have insurance gaps. Even with a policy that covers cyber incidents there may be limits to only certain incidents or losses addressed but not necessarily cover the full spectrum of damages that may be incurred.
Outdated Terminology
The wording of traditional insurance policies will not keep pace with the ever changing nature of cyber threats. It is possible that terms such as cyberattack or data breach will not be defined. This fuzziness brings uncertainty and delay in the process of claims processing and hence affecting a business’s recovery.
High Deductibles and Exclusions
Even in those cases where a cyberattack does fall under traditional policies with very limited coverage and high deductibles may be required of a business and thereby shifting large portions of financial burdens onto the entity. Other than that and the policies may exclude certain types of cyberattacks and ransomware demands and or reputational damage and hence further delimiting the financial coverage.
Focus on Reactive Measures
Traditional insurance is mostly reactive in that it provides compensation in the case that something goes wrong. In this regard such a policy does very little in the way of preventing cyberattacks or even mitigating this initial disruption to business operations. This leaves the business rushing to recover financially and and in turn losing some very valuable time in compromising long term stability.
It’s essentially an archaic shield to combat threats which are constantly evolving in this digital age. Such limitations in coverage and language and focus created a chasm that has left businesses helpless at the hands of mounting costs against cybercrime. Cyber insurance is designed specifically to fill all such voids and builds itself into an imperative complement to traditional policies by offering a complete safety net with proactive support for risk management.
The Benefits of Cyber Insurance
With new and varying threats coming to the fore and cybercrime becoming increasingly expensive and companies are turning toward cyber insurance as a haven. This specialized insurance can do what traditional policies can’t. It delivers a full package of benefits that are paramount to business continuity and fiscal recovery. In detail and here’s what cyber insurance can offer
Financial Protection
This provides an organization with crucial financial cover in the event of a cyberattack. It can also cover many other costs and such as
Data recovery
Recovering lost data resulting from an attack is often very expensive. Cyber insurance can help the business recover such data effectively and thus saving on reduced productivity and less downtime.
Business Interruption
Because cyberattacks may cause disruption to normal business and revenue is lost. This is where cyber insurance steps in to recover such losses and get back on track at a faster pace.
Public Relations and Crisis Management
Cyber attacks may result in loss of reputation for a company. Cyber insurance can provide the financial cover when conducting public relations campaigns to fix their image.
Credit monitoring and Identity theft protection
In case of a breach of data this could result in the customers’ information being exposed.By covering these expenses and cyber insurance helps businesses mitigate the financial impact of a cyberattack and allows them to focus on recovery and rebuilding customer trust.
Risk Management and Prevention Services
Many cyber insurance providers offer services beyond the financial protection given. Such services can and among others include vulnerability assessments. Business companies can and by identifying and remediating weaknesses within their cybersecurity posture and reduce the risk of a successful attack by quite a large margin. Cyber insurance providers might provide vulnerability assessments so businesses can identify and set priorities regarding such weaknesses.
Security awareness training
Actually the key to preventing a phishing attack and/or social engineering scam is to educate the employees regarding cyber security best practices. Many cyber insurance providers will offer security awareness training programs to help businesses train their employees.
Incident response planning
In the event of a cyber attack a business might lose a tremendous amount of downtime and data therefore and having a response plan in place to minimize the impact of such incidents is very necessary. Cyber insurance providers may support businesses in formulating and implementing incident response plans.
These make for a claim for compensation among other services that cyber insurance companies have in store. They are proactive in helping a business put itself in order cyber security wise and preventing the attack from happening in the first instance.
Improved Compliance
Many of the regulations require customer data of businesses to be treated with protection. In assisting organizations in compliance and most cyber insurance coverage extends to costs from data breaches and related notification requirements. Some of the policies might include fines and penalties for non compliance.
Through the improvement of a business to meet and adhere to data privacy regulations and cyber risk insurance brings peace of mind and reduces the risk of regulatory scrutiny.
It provides much more than financial protection for damage rather and it befalls as a backup plan that can handle all aspects with regard to cyber threats and recover efficiently from attacks and and continue in line with set regulations. With the digital age expanding and cyber insurance rapidly becomes an invaluable tool of business management in companies of every size through ever looming threats.
Various Types of Cyber Insurance
The cyber insurance market is awash with a great variety of policies that target giving businesses the suitable coverage they require. Understanding these various types of coverage is paramount for a business to be able to subscribe to the right policy and ensure it is getting the right protection. Here is a breakdown of some of the most common types of cyber insurance
First Party Coverage
This kind of insurance coverage focuses on expenses sustained by the business itself as a result of a cyberattack. It typically covers expenses such as data recovery (cost of reconstituting lost or damaged data) and forensic investigation to determine the source and extent of the attack and business interruption (lost revenues due to the enterprise being laid low by the attack) and and cyber extortion associated with ransomware demands. (This may be subject to limitations.).
Crisis management
Costs incurred through public relations and reputation mending. Credit monitoring Protection services against identity theft for the affected customers. First party coverage provides a financial safety net during recovery from the direct financial effects resulting from a cyber attack.
Data breach lawsuits
A business can be sued by customers whose data has been breached as a result of its negligence.
Privacy violation
Lawsuits about the breach of regulations pertaining to the privacy of data
Network security liability
Claims related to the failure of a business to properly maintain adequate security of the network
Third party insurance coverage protects businesses from legal and financial implications that could arise as a result of data breaches and privacy violations.
Cyber Extortion Coverage
This is a more specific type of coverage that handles the ransom demands from ransomware attacks. It could cover the following expenses and which include but are not limited to
Ransom payments
Payment made to regain access to encrypted data might be subject to limitations or exclusions.
Negotiation expense
The cost of hiring negotiators who are to deal with cybercriminals.
Cyber extortion defense cost
Related to the legal expense that goes into defending against extortion attempts.
Another reason is the increased area of cyber extortion coverage in cyber insurance as a result of the rise in ransomware attacks. In addition it should also be mentioned that many policies either limit or totally exclude covering ransom payments.
Errors and Omissions Coverage
This is often included in larger cyber insurance policies and protecting businesses from professional liability claims related to cybersecurity failures. This could be an allegation that a business has failed to appropriately secure customer data or did not disclose a security breach in a timely fashion.
E&O coverage adds further security for companies operating under professional service provision and handling sensitive information.
Network Security Liability Coverage
This often goes with the costs associated with the failure of a business to exercise due care in maintaining adequate network security. Some of the expenses it can cover include the following
Regulatory fines and penalties
These are fines set by regulatory bodies for non compliance to the set regulations on data security.
Costs of regulatory investigations
Legal expenses related to responding to government investigations into a security breach.
Network security liability coverage helps firms reduce their financial exposures relating to non compliance with data security regulations.
The correct form of cyber insurance would be one that caters to the individual needs and risk profile of each business. Some may only need first party coverage and while others may want a comprehensive policy that combines the above mentioned types. Consulting with a professional in cyber insurance will help businesses find the right options for coverage and develop a policy that most suitably covers their cybersecurity risks.
Conclusion
The threat of cyberattacks is very genuine in this digital age and does not hold any favors between big or small businesses. Traditional insurance policies usually have insufficient coverage to protect businesses from these threats.
Cyber insurance is the most indispensable weapon in the digital battlefield. This kind of insurance can provide a wide safety net against most types of cyber attacks by getting financial protection. From recovery of data to legal expenses and cyber insurance supports a business through the storm and in recovering efficiently. However it can’t be said enough that risk management is key. Having robust measures of cybersecurity and employee training and vulnerability assessment as part of a proactive approach is quite important in preventing such attacks entirely and not relying on insurance payout.
Whether cyber insurance is necessary falls back to a business’s personal risk profile and budget. However and with ever increasing costs from cybercrime and limits within traditional insurance becoming more and more exposed and it most definitely will be an attractive option for a good many businesses. With a designed cyber insurance policy and a strong risk management strategy businesses can take on the digital age with much more confidence and establish the enterprise to be more resilient to thereby positioning it better for the future of ever evolving cyber threats ahead.