The 21st Century Solution for Business Protection: Cyber insurance

Ordering a pizza, listening to music, getting a mortgage. All are examples of normal activities that have adapted with the emergence of computers. It is no wonder that insurance has also taken part in this advancement into the new era. However, this new, innovative idea that combines insurance with computers holds a name that the average person may find overwhelming and hard to understand: cyber insurance. On the surface, cyber insurance is very similar to most other insurance. Carriers take on your risk for a price in order to limit your losses in a case regarding cyberspace. However, since this is new, there are a lot of questions about coverage and how to purchase a plan.

Cyber Policies

Cyber attacks can cripple a company as so much of a business is done through computers these days. For that reason, it is imperative that companies become acquainted with cyber insurance, as it will  cover against these devastating hits. Cyber insurance mitigates the risk involved with doing online business which allows for companies to take part in a new growth area while still being protected against the heightened risks involved with doing business online. It is also important to understand what each policy covers as there are some pretty complex rules that carriers follow when determining their exposure to certain events.

With a whole new category of insurance in place, it is important for businesses to understand what exactly is incorporated into their cost of insurance premiums, so they can take the resulting steps to reduce these costs as much as possible. A few factors that affect a cyber insurance premium are annual revenue, industry, and network security. So although cyber insurance will be an additional cost incurred for a company, there are ways to reduce this cost while still reaping the benefits of diminished risk surrounding cyberspace. Even with this additional cost, it still makes sense to take advantage of this new insurance. Hacking can disrupt business dramatically while causing costs to skyrockets and the company’s reputation to plummet.

FAQs

What needs to be covered?

It is important to understand what the biggest risk areas are. After determining the largest risk areas based on potential reputation damage, restoration costs, and reimbursement from regulatory fines, it would be logical to cover as much as possible starting with the largest risk areas.

What are the different types of cyber liability insurance?

Cyber liability insurance falls into two main categories: first-party and third-party. First-party insurance covers the holder’s direct losses from cyberattacks while third-party insurance covers companies that allowed a client network to experience a data breach. Some things that first-party insurance would cover include data theft, compensation for lost income, costs of notifying customers, and the cost of repairing a company’s reputation. An example of third-party coverage would be the following. A company made a website for another company and hacker took over the website. The creating company might receive legal fees and compensation for settlements or damages in court cases.

Exclusions of cyber incidents from coverage?

There are a few issues that most providers don’t include in coverage. Some of these include cyber issues resulting from failure to maintain a minimum level of cybersecurity, the careless mishandling of sensitive information, and malicious acts by employees. All of these examples should be avoidable through careful management and decision making.

In the case that it’s the company’s fault, do insurers still pay?

The short answer is that it depends on the situation and policy. Depending on what the coverage agreement is, insurers may still cover issues that are the company’s fault.

How long does a company have to report the breach?

Insurance companies like for companies to report the breach when practical. They understand it might take time as a company’s first priority may be to fix the problem. They also know they may need to provide clarity to all affected. However, the insurance company might become concerned if the issue is reported a long time after it is discovered as that might come off as fishy and affect the settlement deal.

Pricing of cyber insurance?

The main factor in pricing cyber insurance is the company’s annual revenue, as more revenue correlates to higher risk exposure. In addition to revenue, insurance companies also look at industry type. It is important how much network security there is in order to price insurance premiums.