Should You Consider Cybersecurity Insurance to Protect Against Breaches?

By 2027, global spending to secure data in cyberspace may reach $10 billion. Despite the tremendous resources poured into keeping hackers out, daily headlines continue to remind us that even government agencies aren’t immune to breaches.

What Is Cyber Insurance?

A cyber insurance policy helps your organization pay for the costs to recover from data breaches and other cyber attacks. This product evolved from errors and omissions (E&O) insurance in 2005. PwC estimates that by 2020 premiums will reach $7.5 billion. Almost a third of U.S. businesses have added this coverage to their business insurance plans.

What Does Cyber Insurance Cover?

With so many businesses signing up for cyber insurance, you may be feeling left behind. Before you discuss adding it your your commercial or BOP policy, it’s important to understand what’s actually covered.

If you are attacked by cybercriminals, this coverage pays for expenses related to recovery costs. This insurance is still relatively new, so coverage varies greatly from provider to provider. Here are some of the most common covered perils:

• Investigation: After a cyberattack, the first task is figuring out how to repair the damage to your network. This involves hiring a forensics team , to fix the damage and determine how to prevent a future breach. Investigations may include a third-party security firm and the appropriate authorities, such as the FBI.

• Business losses: Your policy may include monetary losses due to network downtime, data loss recovery and business interruption. Business losses typically include the costs of managing the crisis.

• Notification requirements: Data breach notifications are required by several federal and state laws. You may need to work with the authorities to provide credit monitoring to any customer whose personal data has been compromised.

• Lawsuits and cyber ransom: This pays the legal expenses related to privacy and regulatory implications. Some policies pay the cost demanded by ransomware perpetrators to regain access to your data.

5 Tips for Buying a Cyber Insurance Policy

Here are five considerations when buying a cyber insurance policy:

1. Examine Your Total Risk
   Have a firm grasp of your business risks. Document the type and scope of data records stored on your network. You may also need to include data stored by vendors or offsite. This assessment empowers you to make better-informed decisions on the type of insurance to purchase.

2. Consider Your Coverage Needs
   Before purchasing a new policy, your business should examine its existing policies to determine what type of cyber risks may already be covered. Commercial general liability policies may already provide coverage for things like privacy and data breaches. Other policies commonly held by businesses such as commercial property, Directors & Officers, and Errors & Omissions, may also offer coverage.

3. Compare Cyber Insurance Options
   Work with more than one insurance provider to compare limits, coverage and exclusions. Each policy should cover the following elements:

   • Costs of investigations, such as administrative and regulatory expenses.

   • Fines, penalties and ransomware demands.

   • Crisis management costs related to a data breach. This includes client notifications and credit monitoring required by law.

4. Consider Other Costs
   Many data breaches occur on digital networks. Data can be stolen in the form of hard copies in a briefcase or someone’s home office. Your cybersecurity policy and insurance coverage should take these risks into account.

5. Consider the Cloud
   Some cyber insurance limits coverage to the insured’s acts and omissions. This is a problem for the growing number of companies that store their data on the cloud. Given the move toward this technology, you should find a provider that covers cloud data storage.

Each business will have its own list of concerns and questions when it comes to whether to buy a cyber insurance policy. There’s no definitive answer, but the trend seems to be a rising awareness that it’s not enough to focus on identifying and blocking hacking attempts. Some breaches are the result of months of preparation that goes undetected. You can add the lastest security bells and whistles to your digital home. But having an insurance policy to protect you from determined thieves is also a smart choice.

ABOUT THE AUTHOR: JEFF POIRIOR

Jeff brings 25 years of telecommunications and information technology management experience in voice and data networking, server support, and telephony and security; with a significant emphasis on customer service. Prior to joining Valicom, he was chief of the infrastructure support section for the Wisconsin Department of Transportation. Jeff was the vice president of operations for CC&N, overseeing telecommunications, help desk, data and desk side support services. Prior to that, he served as the associate director of technical resources for Covance, responsible for managing systems and network operations supporting 1700 users in Wisconsin and Virginia. He has also led data center operations at Magnetek Electric, supporting mainframe systems, client/server applications, telephony systems, and computer-aided design. Jeff holds a bachelor’s degree in business administration from Cardinal Stritch University and a master’s degree in business administration from University of Phoenix. In addition, Jeff is a past board member of the Wisconsin Telecommunication Association.