Cyber Insurance Coverage Best Practices

September 22, 2022 | By IANS Research

An essential protective measure, cyber insurance used to be fairly straightforward to obtain however, rising premiums and tighter terms now present challenges for those seeking the best cyber incident coverage. 

This piece details cyber insurance coverage types and the benefits of cyber coverage. Additionally, find best practices for choosing a cyber insurance carrier and policy for optimal protection for your organization. 

Cyber Insurance Coverage Categories 

Cyber insurance is offered in categories of specialty insurance that protects businesses from liability in the event of data breaches. Cyber insurance is usually excluded from general organization liability insurance, so organizations need to purchase this additional protection. 

Several types of cyber insurance keep organizations protected in the event of data breach, client and ransomware liability. The extent of this cyber liability protection varies by policy. The most comprehensive cyber liability insurance covers legal expenses and settlement costs if a client files a lawsuit alleging your organization failed to prevent data theft. 

First-Party Cyber Insurance 

When looking at cyber insurance for your organization, first-party policies are a good starting point. First-party cyber insurance covers parties directly involved in the data breach incident, usually offering protection for a variety of scenarios like data destruction, hacking, online theft, extortion, and deliberate or accidental service denial. Variations of first-party cyber insurance include: Technology, privacy, trademark and copyright infringement, network security liability and electronic media liability. 

Third-Party Cyber Liability Coverage 

Cyber liability insurance packages apply to incidents caused by outside parties, whether that be third-party suppliers, vendors or contractors. These policies take into consideration errors of commission/omission, security breaches, data theft, business secrets, defamation, and related negative publicity.  


READ:  Third-Party Cyber Insurance Coverage & Pitfalls to Avoid 


Full Coverage-General Liability

Full cyber insurance offers extended protection with general benefits, including post-incident management, structured/planned security audits, and public relations. This type of cyber insurance also supports major investigations, reports, and criminal reward funds following a data breach. 

These policies are used in various ways to protect both organizations and clients from additional risk. One of the most common functions of cyber liability insurance is providing settlements to clients affected by a data breach. 

Depending on the policy, cyber insurance may also be used to cover legal and forensic fees and bridge the gap to cover loss of income during downtime after a data theft incident. Crisis communication and damage control may also be covered in many cyber insurance policies during incident response.


READ: Cyber Insurance Renewal Checklist 
 

Benefits of Cyber Insurance

Organizations need to protect employees, clients, and sensitive information from sophisticated hackers. Cyber liability insurance is a worthwhile investment for organizations of all sizes as breaches increase with advanced methods to steal data. This comes at a time when cybercrime has become all too common, with an 81% jump in cybercrime reports from 2019 to 2021, as reported by the FBI. 

With that in mind, cyber insurance provides: 

  • Data breach liability coverage - If data is stolen from your organization, you are required by law to notify anyone affected. The costs to remedy security breaches adds up, especially with potential legal action on the horizon. Cyber insurance safeguards organizations from liability if data is ever stolen, helping to free up resources and also offering comprehensive support to help remedy the situation as soon as possible. 
  • Loss reimbursement - When business activities are interrupted by IT failure following a cyber-attack or data breach, this could cost significant time and money. Many cyber insurance policies cover this loss of income during interrupted service, while some insurance covers increased operating costs after a cyber-attack, too. 
  • Cyber extortion protection Ransomware is a malicious and highly disruptive incident for any organization, designed to steal and withhold sensitive data until a ransom fee is paid. Such attacks are now extremely expensive to organizations, so cyber liability insurance that helps cover cyber extortion losses is an important investment. 
  • Forensic support - If a cyber-attack occurs, your organization needs to investigate the source and extent of the breach. Comprehensive cyber insurance policies usually offer forensic support with reimbursement for expert forensic advice and services. High-level insurance policies may have 24/7 cyber specialist support which makes a big difference after a serious data breach. 
  • Legal support - In addition to forensic support, cyber insurance can cover legal assistance in the aftermath of cyber-attacks. Legal fees quickly rack up during damage control after a data breach, so cyber liability insurance helps organizations obtain the level of legal support they need for a difficult situation. 
  • Extended coverage - General business liability insurance doesn't always protect against data breach losses. Considering data is often worth more than tangible assets, a high level of protection specific to cyber activity is recommended to protect your organization's reputation and financial standing. 

Why Your Organization Needs Cyber Insurance 

If your organization has been targeted by cyber criminals, you know all too well how costly the recovery process can be in the aftermath of a data breach. It makes sense to add an extra layer of protection, especially with so much at risk for your organization. 

Even if you haven't been adversely affected by a cyber-attack yet, threats and risks are always there for businesses in every sector, especially as hackers get more brazen in their attempts to steal data and infiltrate organizations' digital assets. With this heightened risk and a greater reliance on data and digital technology, cyber insurance is recommended for all organizations working with sensitive information, data and clients. 

Questions to Ask When Choosing a Cyber Insurance Provider and Coverage   

  1. What are your organization's risks and exposures? 
  2. Have there been previous cyber-attacks or attempts? 
  3. What is the current maturity level of network security? 
  4. What type of cyber coverage makes most sense for your business? 
  5. What steps are taken by the provider after a cyber-attack or data breach? 
  6. How much is cyber insurance worth to your organization? How much will you budget for premiums?  

Cyber incidents are challenging enough to security teams and the organization with expenses, reporting and damage repair.  Don't let sophisticated hackers steal your company's data and put you at additional liability risk. Be sure to add some much-needed protection with the right cyber insurance liability coverage aligned to the organization. 

Although reasonable efforts will be made to ensure the completeness and accuracy of the information contained in our blog posts, no liability can be accepted by IANS or our Faculty members for the results of any actions taken by individuals or firms in connection with such information, opinions, or advice. 


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