- March 5, 2020
- Tag: Insurance
Recovering from cyberattacks can not only be a financially daunting task for organizations, but also emotionally and physically exhausting as they tend to spend millions of dollars in damage control and mobilizing resources; that’s where cybersecurity insurance can play a significant role.
Most of the cybersecurity frameworks today have very little focus on cyber insurance as a compensating control to protect the confidentiality, integrity, and availability of any organization’s information assets. Existing frameworks have made organizations assume that they can protect their information assets and secure themselves from losses caused by cyberattacks, by focusing efforts solely on detective, preventive, physical, and logical controls. Unfortunately, it’s a bitter fact that this is not the case.
Why is Cybersecurity For Insurance Companies Important?
Insurance companies handle massive amounts of Personally Identifiable Information (PII) of customers or Personal Health Information (PHI) of patients many times. Cybersecurity breaches in such companies can compromise the confidential and sensitive data of their customers as it happened in AXA Insurance breach of 2017. Such violations can have far-reaching implications and require a balanced approach while dealing with privacy vs. security. The insurance company could end up paying a fortune in damages generating because of fines for non-compliance to HIPAA, GDPR, NYDFS, CCPA, etc. Knowingly and unknowingly, sharing, processing, and retaining data without the knowledge of the customer may be a violation of consumer’s privacy requirements and can result in business-crippling litigations.
How Cybersecurity Insurance Provides a Great Opportunity For Insurance Companies:
Cybersecurity breaches are taking place regularly at an unprecedented rate, even in extremely secure environments. The situation offers a great opportunity for cybersecurity insurance companies to convince the organizations that cyber insurance is an investment and will play the role of compensating control before, during, and in the aftermath of a cyberattack, as:
- It is critical for business resiliency and is also required by many regulators.
- It helps to protect organizations from the resulting financial fallout.
- Helps to build customer trust in the organization’s capability to secure their valuable data.
- Protects the organization from negative publicity and losses arising from reputational damage.
Bundled and stand-alone cybersecurity premiums stood at $2 billion this year. According to a recent study, the premiums are projected to reach $20 billion by 2025, which is an excellent opportunity for insurance providers around the world. The Infographic portrayed below represents this opportunity more accurately, as the commercial cyber liability insurance market is expected to reach around $7B in written premium.
What Role Does Insurance Play In The Field Of Cyber Security?
Cyberthreats increase in complexity, variety, and scale every year, and the chances of getting compromised can never be zero. Cyber insurance helps build cyber resilience; helps with regulatory fines, legal fees and other related expenses; facilitating payments for business resiliency and cost associated with repairing or replacing of IT infrastructure. Hence, cyber insurance help enterprises take a balanced approach and diversify their information security strategy against the risk of cybersecurity breaches, by transferring the risk to a third party. The infographic below shows the status of organizations concerning cyber insurance according to revenue:
The Benefits Of Having Adequate Cyber Insurance
- Eliminates Business Interruption: The insurers can cover their client’s loss of income, and help organizations in business continuity and disaster recovery efforts post a cyberattack by providing necessary finances.
- Helps Handle Privacy Infringement Claims: Cyberattacks can result in a compromise of critical and sensitive client data, infringing Consumer Privacy Requirements, and may result in litigation.
- Deal With Extortion Cases, regulatory fines. etc.: Cyber insurance may assist with data recovery, restoration costs, and also associated regulatory fines or legal expenses.
- Saves Brand Reputation: A significant fallout of the data breaches that result in a violation of Consumer Privacy Requirements is the loss of prestige for the concerned company.
- Protection Against Loss of Intellectual Property: Security breaches can lead to theft of Intellectual Property. Insurance can hedge against the loss of valuable IP using a robust cyber insurance setup.
How Does Cybersecurity Insurance Become A ‘Compensating Control’ For Companies?
A compensating control is a mechanism that acts as a viable alternative to other security measures that might be impractical or challenging to implement at a particular time. Cyber insurance acts as a compensating control by covering the following cybersecurity risks:
- People: risks can arise from inaction, unintended actions, or deliberate acts of employees or supply chain partners.
- Processes: failed internal processes can occur due to a failure in process design, execution, and errors in-process controls.
- Technology: cyber insurance can compensate for the losses caused to the company due to hardware, software, or other system and technology failures.
What Cyber Security Related Dangers/Losses/Threats Can Insurance Help Mitigate?
Cyber insurance can help mitigate the following cybersecurity-related threats:
First Party Loss or Damage:
- Damage caused to data and software, and the cost of their restoration.
- Intellectual Property, loss due to a reduction in revenue, market share, etc.
Business Interruption Costs:
- Damages caused due to the unavailability of IT systems
- Loss of revenue because of a security breach
Third-Party Liability Coverage:
- Cost of investigating and responding to a cyberattack.
- Legal expenses, regulatory investigations fees, etc.
Several business organizations, including healthcare and IoT providers, are wholeheartedly embracing cyber insurance around the world, especially those with an ever-changing business environment. While Cybersecurity compliance is a critical way to assure the privacy and security of sensitive data, cyber insurance ensures that a backup-plan is available for proactive remediation purposes.
At Goldsky Cyber Security, our specialized security engineers are equipped to deliver full-service cybersecurity solutions, specialized around cyber insurance products that are customized to assist small to mid-sized businesses meet overarching data security needs. Our vertical approach ensures that we cover both government and industry-related regulatory frameworks, while ensuring business continuity and improving the cyber-resiliency posture of your business against cyberattacks.
With offices in Denver, Orlando, Tampa, Nashville and Washington D.C GoldSky offers reliable 24/7/365 security solutions to the entire US. Get in touch to learn more about how GoldSky can keep your data secure today.
- OECD (2017), Enhancing the Role of Insurance in Cyber Risk Management, OECD Publishing, Paris: http://dx.doi.org/10.1787/9789264282148-en
- Understanding Cyber-Risk and Cyber-Insurance (By Gareth W. Peters, Pavel V. Shevchenko, Ruben D. Cohen): https://www.mq.edu.au/research/research-centres-groups-and-facilities/prosperous-economies/centres/centre-for-risk-analytics/publications/publications/working-papers/2017/Understanding-Cyber-Risk-and-Cyber-Insurance-CFR-WP18-01-2.pdf
- How cyber insurance can help you manage information security risks (By Luke Irwin 16th July 2019: https://www.itgovernance.eu/blog/en/how-cyber-insurance-can-help-you-manage-information-security-risks