Is Cyber Insurance Important?

Last year, it was reported that less than four in ten businesses (37%) are insured against cyber risks. Whichever side of the stat you fall on, part of your IT review should question: Is cyber insurance important?

As our lives become increasingly digitised, the threat of cyber attacks is on the rise. Cyber criminals are constantly finding new ways to exploit vulnerabilities in our online systems, from stealing personal data to authorising root privileges to accounts outside of your business. This is where cyber insurance comes in. But what is it, do you need it and what should you be aware of?

What is Cyber Insurance?

Cyber insurance is a type of insurance policy that can protect businesses and individuals from internet-based risks. It provides coverage for financial losses resulting from cyber attacks, such as data breaches, theft of intellectual property, and business interruption. Cyber insurance can also provide coverage for legal fees and regulatory fines associated with a cyber attack.

The Importance of Cyber Insurance

Cyber attacks can be devastating for businesses and individuals alike. They can result in lost revenue, damage to reputation, and even legal liabilities. Cyber insurance can provide a safety net for those affected by such attacks. It can help businesses recover from the financial losses associated with cyber attacks and provide peace of mind to individuals that their personal information is protected from becoming another statistic of data breached.

In addition to providing financial protection, cyber insurance can also help businesses mitigate the risk of cyber attacks. Insurance providers often offer risk management services to help businesses identify and address vulnerabilities in their systems.

Typical Requirements for Cyber Insurance

While policies can vary, there are some typical requirements that are often included. These include:

• Security Controls – Insurance providers may require businesses to implement specific security controls to reduce the risk of cyber attacks. This can include firewalls, encryption, MFA and employee training.
• Incident Response Plan – Businesses may be required to have an incident response plan in place in case of a cyber attack. This plan outlines the steps that should be taken in the event of an attack and can help minimise the damage.
• Regular Audits – Insurance providers may require regular audits of a business’s security systems to ensure they are up to date and effective.
• Disclosure – Businesses may be required to disclose any past cyber attacks or data breaches when applying for cyber insurance. This information can help insurance providers determine the level of risk associated with insuring the business.

A Word of Caution

Research found that over 25% of claims made in 2022 had some exclusion written into the policy that prevented part-pay out or full-pay out leaving the insured with a shortfall or, in some cases, zero pay out meaning total loss. The same source notes that 99% of all cybersecurity insurance claims came from SME companies. It’s clear that the impact of a claim not paid out could lead to huge financial loss due or even closure. In essence, when choosing your insurance ensure you know what is covered and mitigate risks for areas not covered.

If you’re wanting to protect against the financial and reputational damage associated with cyber attacks, then cyber insurance is important to consider. Make sure that you understand fully the coverage you’re getting, but by meeting its requirements you inevitably take steps to secure your business. If this is something you’d like further guidance on you can request a chat with one of our experts.