An ever-more-essential component of corporate risk management strategies is cyber insurance.
I have emphasized on LinkedIn that there is potential for cyber insurance to change the cybersecurity landscape in addition to other obvious advantages. Let's examine these features in more detail to see why cyber insurance is essential to a thorough risk management strategy rather than just an add-on.
The Tools and Support of Cyber Insurance:
Security Advisors and Incident Response:
Policies covering cyber insurance frequently include access to incident response and security adviser teams. These experts are at the forefront of understanding and reducing cyber risks. They offer advice both during and after an incident, assisting in reducing damage and hastening recovery.
These teams are resources for the insureds to use. In fact, most cyber insurance companies will require that you use the assigned teams in a response to help mitigate damage and get boots on the ground before a catastrophic attack occurs. When these teams are incorporated into a cyber incident response plan, it strengthens the overall posture of the cyber risk.
Risk Monitoring:
In an environment where dangers are always changing, risk monitoring is essential. To help you keep ahead of potential risks, cyber insurance providers often offer services to monitor the risk levels particular to your company class. As much as a business owner wants to ensure they are not the victim of a cyberattack, the insurer wants to ensure they have a pulse on the vulnerabilities in each business class. If an insurer notices an influx in claims for a specific type of business, they will have a better idea on how they can mitigate future risk.
These benefits are not always included, however, and it’s important to understand how a cyber policy is structured.
The ‘Add-On’ Misconception:
Cyber insurance is still viewed by many companies as an additional, rather than a necessary component. My goal is to alter this perception. There’s an increased risk of cyberattacks as digital transformation continues to evolve.
So why should you consider a stand-alone policy versus a cyber endorsement?
This could be a blog (and probably will be). However, for the purpose of this summary we want to consider a couple key components.
Add-on cyber endorsements are limited in nature. Typically, the limits are much lower than what you will find on a standalone policy (think $50k versus $2M) – which would you feel better covered by?
Another consideration is first- and third-party coverages. While it can happen, endorsements do not typically include coverage for third party claims. In a situation where your service is under a cyberattack and it impacts your client base, lawsuits have limited coverage under an endorsed cyber add-on to your general liability policy.
Lastly, endorsements are often included by carriers who are not able to offer the resources that a stand-alone company can provide. From security advisors to incident response teams, standalone policies offer more robust and broad solutions for your business.
The Future Cybersecurity as a Need for Conducting Business:
There is a growing idea that cyber insurance will become necessary for conducting business, much as general liability insurance is currently a normal necessity. This is about providing a safe and secure business environment for all parties involved, including partners, suppliers, and customers, not just about safeguarding the specific organization.
Framework for a Stronger Cybersecurity Market:
Cyber insurance inadvertently encourages the adoption of best practices in cybersecurity by placing requirements on organizations to qualify for coverage. This improves the security posture of the company as well as making the market more resilient.
The Impact of Obtaining Insurance Coverage by Applying Industry Best Practices:
Businesses must put in place cybersecurity procedures that are acknowledged by the industry to be insured. This procedure incentivizes firms to maintain current security protocols and consistently enhance their defenses. Businesses can look at frameworks like NIST, ISO, COBIT, among others.
By implementing these frameworks, companies become more insurable and can negotiate lower cyber insurance premiums in addition to more favorable policy conditions.
Cyber insurance is an essential weapon in the toolbox of the modern corporation against cyber criminals and threat actors alike, far from being only an add-on. In addition to acting as a safety net in case of an emergency, it promotes the use of best practices and builds a more robust and resilient cybersecurity industry. Businesses will probably adopt cyber insurance as a routine practice rather than just a recommendation as they continue to navigate the digital terrain. This change will safeguard specific businesses while also making the internet a more secure and dependable place for everyone.
If you want to tabletop your cyber security posture as it relates to liability exposure, reach out to Jake Nystrom, cyRM, CCIS.