“By 2025, cybercrime is predicted to cost the world $10.5 trillion annually, making it more profitable than the global trade of all major illegal drugs combined.” – Cybersecurity Ventures. Cyber threats are an ever-present danger for businesses of all sizes. From data breaches to ransomware attacks, the risks are significant and can lead to substantial financial losses. This is where cyber insurance steps in, providing a crucial safety net. Ensuring your business is prepared and protected is no longer optional—it’s a necessity. Let’s dive into everything you need to know about cyber insurance.
Understanding Cyber Insurance
Cyber insurance, also known as cyber liability insurance, is designed to protect businesses from internet-based risks. These risks include data breaches, cyber attacks, and other digital threats that traditional insurance policies typically do not cover. By transferring some of the financial risk to an insurer, businesses can focus on their core operations with peace of mind.
What Cyber Insurance Covers
Cyber insurance policies offer a wide range of coverages to address various aspects of cyber risks. Here’s a closer look at the key inclusions:
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Reputation Damage
A cyber incident can severely damage a company’s reputation. Cyber insurance covers the costs of public relations efforts to restore trust and confidence among customers and stakeholders. This includes managing media relations and communication strategies to mitigate long-term damage.
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Breach Response
When a cyber incident occurs, immediate action is crucial. Cyber insurance provides access to breach response experts, often referred to as “Hackbusters.” These experts will contain the incident and re-secure your network, engaging digital forensics and crisis management teams as needed.
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Hacker Damages
Cyber insurance covers the costs associated with repairing, replacing, or restoring websites and electronic data compromised or destroyed by hackers. This ensures that businesses can recover quickly without bearing the full financial burden.
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Insider Threats
This coverage addresses damages resulting from malicious acts by an employee, whether targeting your system or a vendor’s system. Insider threats can be particularly damaging due to the access and knowledge employees have.
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Loss of Business
If a cyber incident disrupts your business operations, leading to a loss of profits, cyber insurance can compensate for these financial losses. This business interruption coverage helps maintain financial stability during the recovery period.
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Cyber Deception & Engineering
Also known as social engineering, this coverage protects against financial losses due to deceptive schemes where money is wrongly transmitted or paid to a third party. Social engineering attacks, such as phishing and pretexting, are increasingly common and can lead to significant financial losses.
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Legal & Regulatory Costs
Cyber insurance covers legal expenses arising from regulatory fines or requirements to notify customers about a data breach. This includes the costs of complying with various data protection laws and regulations, which can be substantial.
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Third-Party Liability
This coverage handles costs associated with claims against your business for breaches of privacy laws regarding the protection of third-party data. It is essential for businesses that handle sensitive customer information, as it protects against legal actions and fines.
What Cyber Insurance Does Not Cover
While cyber insurance provides comprehensive coverage, there are certain exclusions that businesses should be aware of:
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Coverage for Investment Activities
Cyber insurance does not cover losses or breaches related to investment activities. This exclusion is important for businesses involved in financial trading or investment management.
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Losses Incurred in Cryptocurrency
Any losses involving cryptocurrency transactions are excluded from coverage. Given the volatile and relatively unregulated nature of cryptocurrencies, this exclusion helps insurers manage their risk exposure.
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Use of Restricted Websites
If a breach occurs due to the use of restricted or unauthorized websites, it is not covered. This exclusion emphasizes the importance of adhering to company policies and regulations regarding internet usage.
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Cost of Upgrading Devices
Cyber insurance does not cover the cost of upgrading or replacing devices to improve security post-incident. Businesses are expected to maintain their own IT infrastructure and security measures.
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Coverage to Workplace
Standard workplace-related incidents are not covered under cyber insurance policies. This exclusion highlights the need for separate insurance policies to cover general workplace risks.
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No Coverage for Gambling Activities
Losses or breaches related to gambling activities are excluded from coverage. This exclusion helps insurers manage their risk exposure and avoid covering illegal or high-risk activities.
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Protection from Legal Suits from a Family Member
Legal actions initiated by family members are not covered. This exclusion ensures that cyber insurance policies focus on business-related risks and liabilities.
How Cyber Insurance Premiums are Decided
Determining the premium for a cyber insurance policy involves a thorough assessment of various factors that influence the risk profile of the insured business. Here are the key elements insurers consider:
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Industry and Business Size
Businesses in high-risk industries such as finance, healthcare, and e-commerce generally face higher premiums due to the sensitive nature of the data they handle. Similarly, larger businesses may have higher premiums because of their expansive digital footprint
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Type and Volume of Data
The type and volume of data a business handles significantly impact the premium. Companies dealing with vast amounts of sensitive personal or financial data are seen as higher risk and thus may face higher premiums.
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Security Measures in Place
The robustness of a company’s cybersecurity measures, such as firewalls, encryption, and employee training programs, can influence the premium. Businesses with advanced and comprehensive security protocols often benefit from lower premiums.
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Claims History
A company’s history of cyber incidents and claims can also affect the premium. Businesses with a track record of frequent breaches may be viewed as higher risk, leading to higher premiums.
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Policy Limits and Deductibles
The chosen policy limits and deductibles directly impact the premium. Higher coverage limits generally lead to higher premiums, while opting for higher deductibles can reduce the premium cost.
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Regulatory Environment
The regulatory environment in which a business operates can also influence premiums. Businesses in regions with stringent data protection laws may face higher premiums due to the increased potential for regulatory fines and compliance costs.
Quick Read: Cyber Insurance Premiums in 2024: What Factors Are Driving Costs?
Real-Life Examples of Cyber Insurance in Action
To understand the real-world impact of cyber insurance case studies, let’s look at a few true examples:
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Target Data Breach (2013)
In one of the most notorious cyber incidents, Target Corporation suffered a massive data breach in 2013, compromising the personal and financial information of over 40 million customers. The breach resulted in significant financial losses, including costs for legal fees, settlements, and reputational damage. Target had cyber insurance coverage, which helped mitigate some of the financial impact, highlighting the importance of such protection.
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Sony Pictures Hack (2014)
In 2014, Sony Pictures Entertainment was hacked by a group calling themselves the Guardians of Peace. The attackers released confidential data, including employee information, emails, and unreleased films. The breach led to substantial financial losses and legal costs. Sony’s cyber insurance policy provided crucial support in covering these expenses, demonstrating the value of having robust cyber insurance.
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Maersk Ransomware Attack (2017)
A.P. Moller-Maersk, a global shipping giant, was hit by the NotPetya ransomware in 2017. The attack disrupted operations worldwide, leading to losses estimated at around $300 million. Maersk’s cyber insurance played a pivotal role in recovering these losses and restoring business operations, underscoring the critical role of cyber insurance in business continuity.
How Mitigata Navigates You in cyber insurance claims?
At Mitigata, we ensure that you are well-prepared and supported in the event of a cyber breach. Here’s how we navigate the process:
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Breach Response & Incident Expenses
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Credentials Breach
When a data breach occurs using stolen credentials, compromising the corporate network and customer data, Mitigata’s Incident Response Manager (IRM) is engaged immediately.
Insured Cost: IRM engagement
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Insurer Notification
A cyber incident notification is made to the insurer, and the IRM is engaged to manage the response.
Insured Cost: IRM engagement
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Crisis Response
The IRM triages the issue and engages legal counsel, digital forensics experts, and PR experts to manage the crisis.
Insured Cost: Engagement of approved vendors
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Data Breach
Digital forensic experts confirm the exfiltration of customer data, and if this data is found on the dark web, necessary steps are taken.
Insured Cost: Digital forensics & audit vendor
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PR/Message Crafting
PR experts collaborate with internal stakeholders to craft public messaging and statements.
Insured Cost: Digital forensics, audit vendor & PR vendor
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Ransomware Attack
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Cyber Extortion
If malicious actors encrypt files or systems and demand payment for decryption, this poses a serious threat to operations and data security.Insured Cost: Digital forensics & audit vendor
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Data Recovery
Experts work with internal technology teams to rebuild corrupted data from backups and negotiate ransom if needed.
Insured Cost: Digital forensics & audit vendor
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Data Theft
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Monitoring Offer
A 12-month monitoring service is offered, along with replacement licenses where required, especially if customer data is found for sale on the dark web.
Insured Cost: Monitoring, replacement licenses
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Liabilities & Fines
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Legal Action
Legal proceedings might be filed on behalf of data subjects, and a privacy investigation commences.
Insured Cost: Defense, settlement costs, insurable fines & penalties
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Why Is Cyber Insurance Essential?
In today’s interconnected world, the frequency and sophistication of cyber attacks are on the rise. Cyber insurance provides a financial safety net that allows businesses to recover from incidents quickly and efficiently. Here are some reasons why cyber insurance is essential:
- Rising Cyber Threats: Cyber attacks are becoming more frequent and sophisticated. Cyber insurance helps businesses stay prepared and resilient in the face of these threats.
- Regulatory Compliance: With stringent data protection laws and regulations, businesses need to ensure compliance. Cyber insurance covers the costs of meeting regulatory requirements and handling legal issues.
- Financial Protection: Cyber incidents can lead to significant financial losses. Cyber insurance provides coverage for various costs, including breach response, business interruption, and legal expenses.
- Reputation Management: A cyber incident can damage a company’s reputation. Cyber insurance includes public relations support to Everything You Need to Know About Cyber Insurance
Book a demo with mitigata and get best premium and free cyber risk console.
Also Read: Cyber Insurance: Terms and Conditions.
