Why Insurance Offerings needs to pace up with Cybersecurity
In the 21st century, one can get insurance coverage for just about anything. From Life Insurance, Health Insurance, Home Insurance, Auto Insurance, to even getting insurance for human organs, has become a trend. To an extent, some policies are also covering from home theft to alien abduction. However, the real damage is happening in cyberspace as the digital age grows, and more users join the internet and reveal sensitive information like bank account details on various platforms. The insurance industry needs to embrace cybersecurity insurance to safeguard companies from ever-growing online crimes. A report by Cybersecurity Ventures projects that cybercrime will cost the world around 6 trillion dollars by the year 2021 with the ever-growing cyber breaches in organizations and enterprises.
Most of the companies are still highly unaware of the cyber nightmare they can face and the crippling attacks which they are prone to. Companies have petabytes of critical information, including customer data, credit card numbers, and passwords, where the stakes are very high if any security breach happens. As companies have interconnected financial, marketing, transportation, and communication infrastructures, a single cyberattack can cost millions of dollars. It requires businesses to safeguard against the dark world of hackers and make sure that their cybersecurity insurance strategy is in place.
What is Cyber Security Insurance?
Global enterprise security teams and law enforcement agencies struggle to keep up with the new methods by which cybercriminals are used to trespass secure infrastructures and hack into networks. The crippling pressure is also in the insurance industry, on how to handle a vast amount of risk and help businesses to protect themselves from disastrous breaches.
Most of the general liability policies do not cover cyber-related risks, and it requires companies to update their services regarding actuarial products and services. It requires enterprises to expand their security parameters to address the emerging risks in the cyber-crime arena.
Modern cyber insurance covers business liability for any data breach, which includes critical customer information such as social security number, credit card numbers, CVV, health records, and driving license information. In such a case, enterprises should act upon the following:
- Notifying customers about a data breach and the risks associated with it
- Restoring personal identities of affected customers
- Repairing damaged computer systems and safeguarding the infrastructure
- Legal fees and expenses
- Recovering compromised data
Specialized cybersecurity insurance protects a range of cyber incidents and losses to businesses that directly suffer from the following:
- Denial of service attacks
- Crisis management activity related to data breaches
- Legal claims for defamation and privacy violations
- Extortion demands
- Hacking, Online frauds
- Data destruction and theft
The insurance market can help companies to reduce the number of successful cyber attacks by promoting the adoption of preventive measures and assist in the implementation of best practices by self-protection and best-in-class security for the enterprise network. Businesses need first-party coverage to protect against losses, which include damaged digital assets such as information, data, software, lost business opportunities due to hacked computer systems, natural calamities affecting the network, cyber extortion in case of hacker holding valuable data for ransom, unauthorized bank transfers or money stolen through an electronic medium.
Third-Party Cyber Insurance
Third-party cyber insurance generally covers partner companies that manage software systems, network, and hold vital information for the primary company. This includes claims against the insured third party in case the client is affected by the breach. Third-party cyber insurance covers security breaches of employee confidentiality, lost customer data and information, and vital information such as credit card history leaked by third-party vendors in case of an infringement.
Pricing of cybersecurity insurance has always been debatable as the ability of underwriters to assess and quantify the damage and risk accurately continues to be a significant challenge for the actuary industry. A lot of insurance companies still not provide cybersecurity insurance due to their dynamic nature. A report by Kaspersky lab suggests that an average data breach for an enterprise in the USA costs around 1.3 million dollars.
How can insurers quantify cyber risk?
One of the primary challenges for insurance companies is to quantify cyber risks, as the technology landscape is ever-changing and progressive in nature By adhering to the simplest exposure method, it generally underestimates the risk and damage done to the company. Traditional approaches fail in assessing the cost of a cyber breach, and technology companies are seeking a framework that can help them to get justice.
Insurtech
As technology advances worldwide, cybercrime will grow with these advancements, and the insurance industry needs to adhere to technology frameworks to cope up with the modern risks. Insurance companies need to integrate technology into their fundamental business models and use tools to maintain and manage insurance portfolio for enterprises. All employees and stakeholders need to be aware of the cybercriminal practices and create policies that respond in time. Ideally, enterprises shouldn’t wait for the damage being done and respond before time to become a cyber-resilient company. On the other hand, insurance companies need to cater to this new market to increase their product offerings and revenue.
