Co-Founder and CEO, Cover Genius.
As cyberattacks become more sophisticated, cybersecurity is quickly becoming an essential aspect of company practices. To illustrate this need, there was a 61% jump in phishing attacks in 2022, with significantly more attacks on mobile devices and messaging apps.
As companies large or small ramp up their defenses, they should be wary of common misconceptions that could have damaging effects on their business. Based on my experience across industries, there are a few aspects of cybersecurity that can be better defined as well as ways for businesses to effectively leverage cyber insurance to address these increasing risks.
Cybersecurity Versus Cyber Insurance
The notion that cybersecurity is the same as cyber insurance leaves companies vulnerable to losses incurred from these increasingly malicious attacks. Similar to how a great mechanic can keep your car running smoothly but can’t cover you when you get into an accident, cybersecurity can help prevent systems from being compromised but not compensate for when it’s too late.
That’s when insurance comes in. While cyber security helps proactively protect a company’s network, cyber insurance helps cover the expenses and services a company needs after suffering an attack.
What To Know About Cyber Insurance
Cyber insurance, or cyber liability insurance, is particularly helpful for responding to data breaches that compromise customer information, but it can also cover everything from business interruption to cyber extortion.
This form of insurance can alleviate a range of damages incurred from an attack and help your company set up better safeguards going forward. For example, if a company falls victim to a data breach, its cyber insurance policy could help them cover the cost of legal fees, PR and hiring experts to identify the cause of the breach to prevent future attacks. Coverage may vary widely between different providers, which is why companies should spend time researching the right option for their business.
Smaller companies, especially, may not need every type of coverage offered by cyber insurance providers and should assess the largest risks associated with their business. Purchasing more insurance doesn’t necessarily mean you’re more protected.
It’s also important for businesses to know what cyber insurance doesn’t cover. This includes property damage (even if the property is damaged or made unusable due to a cyber breach), criminal activity or intentionally dishonest acts performed by the business itself. It will also not cover damages caused by disruptions that are not cyber-related, such as utility failures and weather.
In order to bridge these gaps, I believe it is a best practice for businesses to purchase general liability and professional liability insurance so that they’re covered on all fronts with a comprehensive protection plan.
The True Value Of Cyber Insurance
Though cyber insurance is an added cost, businesses should keep in mind that the cost of coverage will always be far lower than the cost of a potential repair from an attack or breach. This is especially true when it comes to digital breaches, where businesses are not only dealing with actual damages, in the form of lost revenue from downtime or direct theft but reputational damage, which could have a long-lasting impact.
Case in point, when 8.2 million Cash App users found their information compromised by a data breach in 2021, they filed a class action against the mobile payments company. In addition to accusing the company of negligence and insufficient security measures, the lawsuit also noted the delayed notice users received and the additional harm it caused. Other large companies, like Microsoft and LinkedIn, have also experienced fallout from cyberattacks in the past few years.
Small businesses are increasingly becoming a target for cybercrime, as they generally have less protection and fewer resources to monitor and guard their and their customers’ data. They’re also less likely to purchase cyber insurance—only 40% of businesses have some type of cyber insurance, with large companies adopting it more frequently (58%) than small businesses (21%).
Even if a business might not want to purchase cyber insurance, they should, at the very least, have policies and guidelines in place to educate their employees and include procedures for managing attacks when they occur.
How Cyber Insurance Can Complement Cybersecurity Measures
Cyber insurance isn’t a substitute for cyber security—and vice versa—but the two together can help companies develop a strong countermeasure against cyber criminals and make themselves less of a target. Cyber insurance can bring a more holistic kind of protection to cybersecurity firms and the cybersecurity offerings provided by any B2B business. With protection from external attacks from bad actors as well as any missteps or oversights from within the business, companies can focus on their core operations, knowing they’re covered should anything happen.
Nowadays, companies should treat cyber attacks not as a matter of “if” but “when.” When developing their plan of defense, companies should utilize all the tools available to them to effectively manage their risk and minimize any potential losses. I think cyber insurance should be considered a necessary addition to a business’ arsenal to help it weather an evolving digital landscape.
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