With cybercrime becoming more common than ever before, businesses are turning toward cyber insurance to take away some of the risks associated with conducting business online.
Cyber insurance or cybersecurity insurance provides a robust protection again online security threats and data breaches.
Here’s a summary of the benefits of cyber insurance:
While cyber insurance does not replace cybersecurity good practices, it brings peace of mind and mitigates much of the aftermath of a successful cyberattack.
According to Embroker, over 70% of businesses were attacked with ransomware variants.
In 2016, a business was attacked by a ransomware every 40 seconds. This has turned to 11 seconds in 2021, according to a report by Cybersecurity Ventures. It’s a 72.5% increase in ransomware occurrence.
In the first quarter of 2023, there were 831 victims of ransomware, which is a higher victim count compared to Q1 2022 (763 victims).
There’s also been a noticeable surge in the global cyber insurance market size from 2018 to 2021, as shown by Statista:
Clearly, businesses have started to realize the importance of preemptive protection!
Cyber insurance comes in many forms, just like auto or home insurance. There are different policies, services, and coverage depending on which insurance you get.
Here’s a summary of what most cyber insurances will cover:
That’s not all, though. Cyber insurances offer coverage for a wide number of cyberattacks, including:
A robust cyber insurance can make the difference between near-bankruptcy and just another easily-avoidable crisis.
Small and large-scale businesses alike will benefit significantly by acquiring a cybersecurity insurance to protect against the increasing risk of cybercrime.
No defense is ever impregnable, and this applies to cybersecurity too. Whether through social engineering, security faults, or zero-day exploits, every business will fall prey to cyberattacks at one point.
That’s the idea with cyber insurance – when you do get attacked, you’ll have a fallback protection plan to mitigate the damage inflicted by criminals.
Knowing what isn’t covered by your insurance can better prepare you for unforeseen events.
Here’s what a cyber insurance doesn’t cover most of the time;
Essentially, a business has to prove that they’re acting in good faith to benefit from cyber insurance coverage.
This could mean having a good cybersecurity system, actively trying to prevent cyberattacks, and implementing employee cyber-awareness.
Cybersecurity insurances differ based on their coverage, pricing, and the scale of the protection offered.
This last aspect is dependent on the insured entity’s organization size, annual revenue, industry, and extent/type of coverage required.
Depending on these factors, cyber insurance premiums can range from $500 to $5,000 per year.
Here are a few tips you should consider when choosing a cyber insurance:
It’s important to know that not all cyber insurances are a fit for your business. Pay attention to how they’ll assess your cybersecurity risks.
Questionnaires are extremely inefficient because often, the person answering the questions doesn’t have enough knowledge to comment on complex cybersecurity topics.
Instead, the insurance company should have an expert perform on-site analytics and gather telemetry data to understand how your organization operates online. They should consider your current cybersecurity systems and account for possible data leaks or vulnerabilities.
In this section, I’ll show you two sets of data from Statista:
These stats will reveal the significance of implementing a cyber insurance on your business, and how it can help you mitigate cyber threats.
|Industry||Insurance Paid Out||Insurance Paid Clean-up Costs||Insurance Paid the Ransom||Insurance Paid the other Costs|
|Distribution and Transport||100%||83%||45%||29%|
|Business and Professional Services||99%||78%||40%||23%|
|Media, Leisure, Entertainment||99%||82%||40%||27%|
|Construction and Property||98%||78%||36%||23%|
|IT, Technology, and Telecoms||97%||76%||37%||28%|
|Manufacturing and Production||97%||75%||30%||34%|
|Energy, Oil/Gas, and Utilities||96%||77%||44%||23%|
The clean-up costs consist of expenses necessary to restore functionality and operations to the organization.
The “other costs” refer to the cost of downtime, lost opportunities, and other expenses suffered because of a cyberattack.
As you can see, in most industries, insurance companies paid over 72% of organizations the clean-up costs required to get back up and running.
Less than half of the organizations across most industries (except Lower Education) got their ransoms paid out by the insurance company.
And less than 30% of organizations across all industries got “other costs” paid out by the insurance company.
|Year||Insurance Paid Out||Insurance Paid Clean-up Costs||Insurance Paid the Ransom|
This survey was conducted in September 2022 and had 5,600 respondents from 31 countries participate.
There’s a noticeable increase in payments made by the insurance company, including clean-up costs from 2019 to 2021.
However, there was a decrease of 4% in the number of cases that insurance companies paid the ransoms to clients.
Judging by this statistic, it seems that insurance companies recognize the negative impact of paying ransoms to criminals.
It’s true that paying the ransom only emboldens criminals to keep launching attacks because they make a profit out of it.
The first question asked by many entrepreneurs is “Do I need a cyber insurance?”, and it’s one that deserves a detailed answer.
First of all, all companies and businesses have a legal responsibility to safeguard their customers’ personal data.
This information is often sensitive, like Social Security Numbers, credit card information, names, addresses, health data, and so on.
The question is “what are the lengths you should go to in order to protect that data?”, and the answer is “anything and everything”.
Neither your client nor the law care about how you protect the data as long as it stays protected. If there is a data breach, it means you haven’t done enough to protect it.
This is where cyber insurance comes to your help. It assumes that your business will be attacked by cybercriminals and you will end up using customer data, which will incur hefty legal fees, operational recovery expenses, and so on.
Here’s a list of businesses that will benefit from cyber insurance:
Already, we can see that the Financial, Health, and Legal industries are included in this list. It’s not a coincidence that these industries are the most targeted by cybercriminals due to the high-value data stored on their servers.
In our analysis, cyber insurance is more than worth the costs of the monthly (or yearly) premiums paid. Just like how a home or auto insurance are also worth their costs in the long-term.
The reason for this is the impossibility of implementing impenetrable cybersecurity protection. There’s no airtight security system that can’t be broken.
If you’re a financial institution and you don’t have cyber insurance, here’s what could happen:
All this can cripple your business, lead to unexpected substantial losses, affect your reputation, financial stability, and impact your operational status.
Having cyber insurance will put you in a much better financial situation. It creates a safety net in case of a data breach.
When disaster strikes and your company is flooded with fees and expenses, the insurance company will have your back.
It’s even more important to consider cyber insurance with the emergence of cybercrime-as-a-service!
Embroker – 2023 Must-Know Cyber Attacks Statistics and Trends
Cyberint – Ransomware Trends Q3 2023 Report
Statista – Global Cyber Insurance Market Size in 2018 and 2020, with Forecast for 2025
Fortinet – What Is Cyber Insurance? Policies, Services, and Coverage
Privacy Affairs – GDPR Fines Tracker & Statistics
Privacy Affairs – Cybersecurity Deep Dive: Everything About DDoS Attacks
PrivacyAffairs – The Art of Cyber Deception: Social Engineering in Cybersecurity
ProWriters – What Does Cyber Insurance Not Cover?
TechTarget – Cyber Insurance
Statista – Share of Ransomware Incidents Where Cyber Insurance Covered the Losses Worldwide in 2021, by Industry
Statista – Share of Ransomware Incidents Where Cyber Insurance Covered the Losses Worldwide in 2019 and 2021, by Type of Payout
Embroker – Cyber Liability Insurance
Forbes – Former CIA Staffer Convicted for Massive Data Breach to WikiLeaks
Justive.Gov – Statement of U.S. Attorney Damian Willians on the Espionage Conviction of Ex-CIA Programmer Joshua Adam Schulte
Privacy Affairs – Cybersecurity Deep Dive: What Is Cybercrime-as-a-Service?