In our digital age, cybersecurity risks are omnipresent. Technology companies in particular grapple with threats such as data breaches, ransomware attacks and other cybercrimes that could wreak havoc on their operations and erode customer trust.
3 Reasons You Need Cyber Insurance
- A cyber crime can sink your company’s finances and reputation.
- Regular errors and omissions and professional liability insurance often does not cover damages resulting from cyber crimes.
- Tech companies are more vulnerable to cyber crimes due to the amount of sensitive data they collect and store.
One strategic move to mitigate these risks is investing in cyber insurance, a relatively new yet rapidly growing field. Here’s what cyber insurance is and why it’s essential for every tech company.
What Is Cyber Insurance?
In essence, cyber insurance covers financial losses resulting from cyber incidents, including data breaches, network damage and business interruption. These policies typically offer first-party and third-party coverages.
One one hand, first-party coverage may include business interruption, data recovery, ransom payments, and crisis management – key elements that could make the difference between survival and closure after a severe cyber incident.
Third-party coverage, on the other hand, may handle legal fees, settlement costs and other expenses related to lawsuits filed by customers or other entities affected by a data breach at your company.
One important thing to note is that cyber insurance is different from professional liability coverage or technical errors and omissions insurance. This protects your company when a technical error causes financial harm to your clients.
The Rising Importance of Cyber Insurance
For tech companies, the risk of a cyberattack is a constant reality. Tech companies are often at the forefront of technological innovation, collecting and storing vast amounts of sensitive data, making them attractive targets for cybercriminals. Moreover, the increasing sophistication of cyber threats means tech firms, irrespective of their size, can fall victim to costly and damaging attacks.
A single significant cyber event can cripple a company, causing severe financial loss and irrevocably damaging its reputation.
Cyber insurance serves as a safety net, offering financial and practical support to navigate through the aftermath of a cyberattack.
Cyber insurance serves as a safety net, offering financial and practical support to navigate through the aftermath of a cyberattack. By reducing potential liabilities and helping restore operations, cyber insurance can ensure that a cyber event doesn’t turn into a catastrophic event that leads to business closure.
Besides offering a financial safety net, cyber insurance can also provide essential resources to manage a cyber incident effectively. Many insurers offer services like incident response planning, cybersecurity training, risk assessments and threat intelligence. These value-added services can significantly enhance a company’s resilience against cyber threats and can be a vital part of an effective risk management strategy.
Navigating the Cyber Insurance Market
The landscape of cyber insurance is perpetually changing, mirroring the dynamic nature of cyber threats. This ongoing evolution has implications for how insurance policies are structured, which can vary from one year to another. As a result, not all cyber insurance policies are the same. Whether you’re already covered or looking to get a policy, it’s always good to evaluate your options.
Securing cyber insurance early in your business journey is a vital step. The reason? Factors like customer count, revenue, payroll and the kind of data you handle influence the cost of cyber insurance. Therefore, getting a policy sooner rather than later can lead to more affordable coverage rates. However, this isn’t a one-size-fits-all rule. Some industries are exceptions due to their high risk of cyberattacks and the sensitive data they handle. This particularly applies to sectors like finance, manufacturing, energy, retail, healthcare and information technology, where obtaining identical coverage can be more challenging.
What Cyber Insurance Policies Should Cover
The specific coverage your insurance should provide depends on various factors, including your business sector, specific needs and third-party obligations. However, some critical areas of coverage include business interruption, network security, privacy liability, media liability and errors and omissions.
- Business interruption: This component provides protection in case a cyber event leads to a disruption in your network, resulting in lost profits and direct expenses.
- Network security: This aspect ensures coverage in instances where a cyber incident results in network security breaches such as data leaks, malware, ransomware or cyber extortion.
- Privacy liability: This coverage protects your business in the event of a cyber incident that necessitates legal proceedings or settlements.
- Media liability: This clause covers your business if a cyber incident results in an infringement of intellectual property rights.
- Errors and omissions: This facet of coverage protects your business if a cyber incident prevents you from meeting contractual responsibilities or delivering services.
If a third-party isn’t mandating a specific amount of coverage, you’ll need to analyze the specific types of threats your company might be susceptible to.
Common Cyber Threats and Attacks
As cyber threats continually adapt and advance, attackers are finding innovative ways to exploit vulnerabilities and avoid detection. Here are some of the prevalent attack types businesses need to guard against.
Social engineering manipulates human interaction to deceive individuals into sharing sensitive information, making unauthorized purchases, or transferring company funds. Common forms of social engineering attacks encompass email fraud, funds transfer fraud, telecommunication fraud and crypto-jacking attacks.
Phishing and Spear Phishing
Phishing is a deceptive tactic where fraudulent messages, usually sent via email and disguised as trustworthy sources, coax recipients into clicking on malicious attachments or links. These messages often request confidential data such as financial credentials or sensitive system access information.
Malware, Ransomware, System Intrusion and Bricking
Malware is harmful software engineered to harm computers, pilfer data, mine cryptocurrency, and undermine networks. It includes trojans, viruses, spyware, cryptojacking and ransomware.
Ransomware is a malware variant that encrypts an organization’s data or information, effectively holding it hostage. It can infect systems via email attachments, downloaded applications or compromised website scripts, with the capacity to paralyze entire networks. To decrypt and regain access to the encrypted files, a ransom must be paid, or the files risk deletion.
Bricking refers to the situation where tech equipment like devices or servers become completely non-functional due to a malware attack, necessitating replacement.
Distributed Denial of Service
Distributed Denial of Service (DDoS) inundates a network with an excessive volume of traffic. The traffic load is so extensive that the network’s ability to communicate and operate is compromised, leading to system failure.
Basic Web Application Attacks
These are straightforward attacks that can compromise a web application in just a few steps, potentially granting access to email accounts or enabling the attacker to misuse an application.
Lost and Stolen Assets
This threat involves the loss or theft of devices like computers or cell phones that contain sensitive data.
Privilege Misuse and Insider Threats
This involves the malicious use of legitimate access privileges within an organization, typically by an internal actor such as an employee. These actors misuse their insider access to obtain unauthorized data.
To sum it up, cyber insurance is a crucial part of any company’s cybersecurity program. Like most types of insurance, it’s better to have it and not need it than to need it and not have it.