Cyber Insurance – The Modern Day Liberator
At the onset of 2021, as the danger from the novel coronavirus has increased, so has the precariousness of privacy in the digital world. Almost every business, large and small, in healthcare, technology, manufacturing and more, is at risk from cyber crimes. And almost every day now, we learn about yet another cyber security incident. In early March 2020, the consulting and advisory company Deloitte, discovered that this global pandemic has caused a surge in security risk and cyber-attacks because of delays in detecting and responding to cyber-attacks. We estimate that in 2021 and beyond, major businesses and companies may fall victim to a cyber breach every 11 seconds. The damage costs for the same may spike up as high as $20 billion – 57 times more than in 2015.
Major revenue losses due to security breaches are common. Research shows that 29% of companies facing a data breach will eventually lose revenue. Among those who lost revenue, 38% experienced a loss of 20% or more. These surface-level costs are just the beginning. There are also many hidden costs associated with such infringement. For example, legal costs may be incurred. You also have to spend more on public relations and investigation, not to mention raising insurance premiums. Regulatory fines are another reality that many businesses have overlooked. For example, in 2015, the FCC charged AT&T with a $25 million fine. This resulted from a breach that led to the disclosure of thousands of account-related information. As the leader of any diminutive or enormous corporation, it is understandable to be unnerved by this fact. But fortunately, there is welcome news for companies and its leaders. We too have a modern day saviour from such cyber breaches and its consequences – Cyber Insurance.
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What is cyber insurance?
We can define cyber insurance as a specialty lines insurance product which “protects businesses and individuals providing services for such businesses, from Internet-based risks, and more generally from risks relating to information technology infrastructure, information privacy, information governance liability, and activities related thereto”.
Simply put, a cyber insurance contract helps to cover economic losses arising from a data breach event or incident. Cyber risk coverage also helps with recovery-related costs, including payment of credit or refunds from legal aid investigators, crisis communicators, and customers.
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Why is cyber insurance important?
Many companies store their customers’ confidential information, PHI and PII, as well as confidential corporate information, either for themselves or for another company. PII or personally identifiable information is all data that can be used alone or in combination with other easily accessible sources to contact, locate or identify a particular individual. PHI or protected health information can relate to an individual's current, past and future health, either physical or mental, and to the person's current condition. The Federal government requires organizations to identify PII and PHI and handle them securely. In case of a data breach, a company has to bear with direct fines and fees, forensic investigations, future security costs. Perhaps the biggest long-term consequence of a data breach is the loss of customer trust. Customers share their sensitive information with businesses assuming that proper security measures are in place to protect their data. A 2017 PwC study examined consumer sentiment around cyber security and privacy risk reported that 92% of consumers agree that companies must be proactive about data protection. The same PwC report found that 85% of consumers won’t shop at a business if they have concerns about their security practices.
However, businesses can and do recover from the consequences of a data breach. Traditional business insurance may not be enough to protect companies from cybercrime. Hence, cyber insurance is very important for companies to cop out of such a breach and losses related to it.
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How does cyber insurance work?
Cyber insurance protects the enterprise from liability to others and reimburses the companies for data breach-related costs. This includes legal counsel and defence, digital forensics team, notification fees, and to set up crisis communications call centres for credit monitoring of people affected by this data breach?
How to choose the correct cyber insurance?
Generally, there are many different types of coverage available. To get the right cyber insurance for a business, one can tailor the insurance for the specific risks the business faces.
The different types of coverage available are :
?Cyber Liability Insurance : which aims to provide protection for many liabilities and property losses caused by cyber-attacks on corporate assets. This type of insurance can also cover data damage or loss, computer fraud, transfer / loss of funds, and cyber extortion.
Data Breach Insurance : This type of insurance can help companies fund data breach investigations, notify affected parties or individuals, case management activities, and other useful services to prevent identity theft and fraud after personal identification (PII) information is disclosed.
?Finally, claims and incidents can occur anywhere in the world, and reporting data breaches vary from place to place. If a company experiences a data breach, it must comply with the privacy laws governing the residence of its customers, not just their location. Therefore, in this case, Global Coverage is necessary.
While choosing the perfect cyber insurance a good first step is to create a cyber risk profile for one’s company and to create a list of expenses to be covered in the event of an incident. Once this list is achieved, a detailed determination of estimation for third-party costs can follow.?
In conclusion, it is an established fact that cyber insurance is of the greatest significance for corporations. After the pandemic, the entire workforce has shifted from working in the office, where cyber security was more controlled, to working from home. This presents a pressing challenge as cybercriminals can exploit this loophole. Thus, it is imperative for a company to have a cyber insurance to protect itself from data breaches, and also loss of private data of their customers.
For further information kindly refer to the articles:
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3 年Very useful