Ah, the World Wide Web, commonly known as the Internet! It provides a capability that is so powerful and universal that it can be utilized for almost anything that depends on information.
Several high-profile data breaches have inspired some insurance companies to offer cyber insurance policies to protect customers from the effects of network threats, such as data breaches.
What is Cyber Insurance?
Cyber insurance, also known as cyber risk insurance or cybersecurity insurance, is an insurance product that covers to help businesses hedge against the potentially devastating impacts of cybercrimes (i.e., malware, ransomware, distributed denial-of-service (DDoS) attacks).
Essentially, cyber insurance covers a business’ liability for a data breach involving sensitive customer information, such as Social Security numbers, credit card numbers, account numbers, driver’s license numbers, and health records.
The policies typically cover first-party coverage against losses associated with cyberattacks. The indemnification stretches to errors and oversights that may have caused the attack, for example, failing to secure a network. The policies also often include public relations responses to an attack.
Do I need cyber insurance?
Honestly, you probably do! As the number of ‘apps’ and devices increases, organizations and individuals become further exposed to cyberattacks. Just like businesses insure against business problems, natural disasters, and physical risks, they now need insurance coverage for cyber threats. If an expensive breach happens, companies may not have the means on hand to combat these issues or recover losses.
The downside of cyber insurance is that insurers always want to minimize risks. Therefore, potential customers are subjected to extensive evaluations of their security procedures before an insurer covers them.
Compared to other insurance products, the cyber-insurance market is relatively small in several countries. Its overall impact on emerging cyber threats is difficult to quantify. Insurance companies continue to develop their services, as the effect on people and businesses from cyber threats is broad when compared to the scope of protection provided by insurance products.
As insurers payout on cyber-losses, and as cyber threats develop and change, insurance products are increasingly being purchased alongside existing IT security services. Undoubtedly, the underwriting standards for insurers to offer cyber-insurance products are early in development.