Everything You Need to Know Before Buying Cyber Insurance in 2022

You’ve done everything to make sure the data in your enterprise is protected from cyberattacks and breaches. But does that mean that you are now immune from future attacks? The answer is a big NO.

Cyberattacks not only affect the enterprises' reputation but can temporarily or permanently handicap a company financially. In 2020 alone, the cost of a data breach set back a company by 3.86 million dollars. Therefore, companies look to formulate backup plans, especially when it comes to dealing with the financial loss of a cyberattack.

What is Cyber Insurance

For many companies, this backup plan involves investing in cyber insurance or cyber liability insurance coverage (CLIC). The primary purpose of this insurance is to assist enterprises in their efforts to make up the costs and dues that have to be paid after a cyberattack or a breach.

Cyber insurance can be obtained for non-financial reasons as well. Some enterprises may choose to invest in it to assist in regulatory compliance and meet contractual requirements.

Factors That Influence the Cost of Cyber Insurance

The amount that an enterprise will have to shell out as a premium and other costs depends on a variety of factors. In addition to this, it can also influence the coverage that a company receives in the event of cybercrime.

Companies will have to consider the following factors before investing in cyber insurance:

1. Industry

The industry in which a company belongs is one of the more influential factors for deciding the cost of the insurance. Companies that belong to industries that are more prone to cyberattacks will have to pay more in comparison to those that are not. These include industries like healthcare, software and finance.

2. Coverage amount

Depending on the revenue that the company is bringing in and the need for a comprehensive insurance policy, the coverage amount may vary. Enterprises will have to determine if they will be adequately covered in the time of a cyberattack with the cyber insurance coverage amount that they agreed to before.

3. Organization size

It is common knowledge that a larger organization is more prone to becoming victims of cyberattacks. Therefore, larger organizations will have to pay larger amounts towards insurance as they will require a wider scope of coverage.

4. Branch number

Similar to the size factor, the cost of insurance will also be affected by the number of branches that the company has opened and the locations in which they are present. This factor is especially influential when the branches are present in different geographical locations as it can mean implementing an extra layer of security.

5. Coverage type

Companies will also have to pay different premiums depending on the risks for which they hope to receive coverage. For example, getting coverage against a more common risk like phishing emails and subsequent attacks can differ from getting coverage against an APT-style attack.

According to a recent study, companies spend around $1,500 per year on cyber insurance. This amounts to a $1 million coverage along with a $10,000 deductible.

What Kind of Coverage is Usually Provided by Cyber Insurance

Although enterprises can choose to obtain coverage for specific needs, there are a few areas that require mandatory coverage. These include:

1. Legal costs

After a data breach or cyberattack, there is a very high chance that the company may need legal assistance to help with lawsuits brought by customers.

2. Regulatory penalties

Regulatory bodies, both international and national, may require the company to pay a certain amount as a fine for being unable to implement the right security measures.

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3. Public relations costs

After a cyberattack, the public perception of the company can significantly decline. Customers and investors may stop doing business with the company either for some time or permanently. Therefore, they will have to fund a PR campaign to retain their reputation and subsequently retain the customers.

4. Forensic costs

The forensic expenses refer to the funds that are put into finding out more about the attack. This includes investigating, mitigating, and finally eradicating the threat altogether. This coverage will help in finding an IT professional to determine the size of the attack and the data that has been lost. In addition to this, the professional will also have to review the systems and backups.

5. Notification costs

Another requirement after a cyberattack is the need for a company to send out notices stating that there has been a cyber attack. This notification will also outline what data has been breached as per the regulations mentioned in Payment Card Industry Data Security Standard or PCI DSS.

Conclusion

Cyber insurance can be a source of hope in the dire circumstances of a cyber attack. Companies will no longer have to be financially handicapped and deprived of important resources during this time. Although cyber insurance can be an expensive investment option, in the beginning, it has valuable payoffs, especially for a company that is prone to cyberattacks.