Every organization that deals with data face cybersecurity threats in one way or the other. Whether it is an accidental data loss or a cyberattack by hackers, loss or damage of data can cause so much harm to a company. So, many companies turn to cybersecurity insurance to protect themselves against such risks and their consequences.
Just like other types of insurance, cybersecurity insurance helps to minimize the effect of risks; this time, cyberattacks and other possible associated risks. However, there have been concerns over what it really covers and whether it’s worth it in the first place. Let’s consider what cyber insurance is, what it covers, and what could possibly be wrong with it.
What is Cybersecurity Insurance?
Cybersecurity insurance is a kind of insurance policy that covers a company against the consequences of cybersecurity issues such as a cyberattack. It is also commonly known as cyber-liability insurance or simply put, cyber insurance.
Truth is, cyber insurance may not cover every possible expense incurred in the event of a cyberattack or data breach. Nevertheless, it can be a good way to cushion the effects and offset some of the cost.
Who Needs Cybersecurity Insurance?
Every business that sends and receives data through electronic means or has an online feature for any kind of operation probably needs cybersecurity insurance. In essence, a business needs this type of coverage if it relies on technology for any of its operation and data processing.
What Does a Cybersecurity Insurance Cover?
There are no strict rules or standards as to what cyber insurance policies should cover. So, different insurers may cover different things under different conditions. Nevertheless, a typical cyber-liability insurance may cover the following;
- Costs associated with a breach, loss, or damage of data due to a cyberattack
- Lost income as a result of a cyberattack
- Costs incurred due to regulatory civil actions such as fines or lawsuits in the event of a cyberattack
- Costs of cyber extortion such as the payment of a ransom in a ransomware attack
- Costs due to communication following a cyberattack incident
- Costs associated with the recovery of data or security systems.
What Are The Problems of Cybersecurity Insurance?
There are some critical challenges associated with cybersecurity insurance both on the part of the insurance provider and the insured company. These problems create doubt as to the efficiency or effectiveness of cyber insurance. Some of these challenges include:
1. Limited Loss History
The concept of cyber-liability insurance is relatively new compared to other types of insurance such as life or health insurance. There are not many cases or cyber loss histories to refer to when setting the terms of the insurance policy.
The implication is that the insurance provider might find it difficult to correctly estimate the prices of insurance premiums or set the loss limits it covers. This poses a risk of either underestimating the costs and bearing the excess later or overestimating the costs and scaring buyers away.
2. Constant Evolution of Cyber Attacks
Hackers constantly evolve their hacking strategies and operations, making it more difficult to predict which kind of cyberattack a buyer is likely to face. Usually, insurers depend on a client’s risk profile to assess potential hack risks.
But most times, the risk profile of clients may not be consistent due to new kinds of cyberattacks emerging every day. It might be the injection is self-destructive viruses today, and ransomware attacks tomorrow. So, it becomes tasking for insurers to know the likely cybersecurity threats to cover.
3. Interconnection and Scalability
It is possible for one cyberattack to affect hundreds of different companies at the same time. The reason is simple: many computers and organizations are interconnected through internet servers and other networks.
For instance, if the server of a web hosting company goes down or loses data, all the companies under the same shared hosting are likely to be affected. The insurance responsibilities of an insurer in such events may become too burdensome if many of the affected companies are all under their coverage.
For the Insured
1. No Standard Policy
A major challenge cyber insurance buyers face is that there are no explicit rules as to what the policies should cover. As a result, companies may run into disagreements with their insurers over whether their insurance should cover a certain cybersecurity issue or not.
Also, the absence of strict standards may make it easier for insurance providers to manipulate their policies to their favor even after signing with a buyer.
2. Limited Legal Precedence
In the event of a default or a breach in the agreement, it is most times difficult to find enough legal precedence that will serve as premises for legal proceedings.
Possible Solutions To The Problems of Cybersecurity Insurance
Most of the challenges of cyber insurance border around uncertainties, whether it is about the scope of risk coverage or evolving hacking schemes. To be on the safe side, the most viable solution is to have a clear definition of the terms of the insurance policy.
This will help define the boundaries of what it covers and what it does not. Both parties should also reach a concrete agreement as to how to handle extreme cases of unforeseen circumstances.
Cybersecurity insurance may have its own pitfalls, but it is increasingly becoming a necessity. This is because data has become an integral part of every company with a lot depending on its safety. Hence, it is not a bad idea for every company to get cybersecurity insurance to protect against possible cybersecurity risks.