Keeping up with the latest security threats can be a full-time job. Bad actors are constantly finding new ways to infiltrate company servers, databases and websites. The result is lost data, locked systems and ransoms. Cyber insurance is critical in fighting these threats, but to get cyber insurance, you may need to conduct a cyber insurance risk assessment to determine your systems' weak points. Here's a look at cyber insurance risk assessments, how to conduct one and more.
What is a cyber insurance risk assessment?
Before you get cyber insurance, your insurance carrier will likely conduct a cyber insurance risk assessment on your company. This is an overview to identify the risk areas and security gaps your company faces. A cyber insurance risk assessment considers not just technology but also company protocols and daily employee procedures that may create a security risk.
Why do you need a cyber insurance risk assessment?
The risk assessment benefits both the insurance carrier and the company it's assessing. Insurance carriers gain the knowledge needed to underwrite the risk appropriately. A business with many areas vulnerable to security breaches will be at higher risk – and incur a higher premium – than a company with fewer issues.
The assessment also benefits the company because the insurer provides a checklist to help label vulnerable areas. With this information, the company can take measures to reduce or eliminate risks. Shoring up exposed systems and processes may prevent hacks and breaches while reducing the premiums the business has to pay the insurer.
How do you conduct a cyber insurance risk assessment?
The insurance carrier performs the cyber insurance risk assessment, but a business can help the process go smoothly by understanding what the carrier must look at and what systems it needs to access.
Before the insurance carrier begins the assessment, it will identify the company's assets to evaluate, including servers, user endpoints and cloud-based operations. Next, the carrier will assign each asset a value to empirically define the assessment's results. Then, the carrier will look into each asset's potential risks.
The insurance carrier will give the assessment's results to the business, highlighting areas of concern. It's up to the business to compare an asset's value with the cost of prevention. This is where comparing loss scenarios is essential. As a business owner, you can choose to improve security proactively or take a reactive approach.
Once the assessment is done, it's up to the business to evaluate and monitor its risk areas.
What is cyber insurance?
A cyber policy is a business insurance policy that includes both first-party and third-party claims. You'd file a first-party claim if your business has hard costs associated with a breach. Other people could file a third-party claim against you, saying your business didn't safeguard personal and private data adequately.
First-party cyber insurance covers the destruction of your property, including:
- Investigation costs
- Repairs to damaged equipment
- Lost revenue
- Consumer notification costs
- Consumer credit monitoring costs
- Ransom paid to a hacker to restore files
Third-party cyber insurance covers your consumer data liability, including:
- Legal fees
- Settlements and court judgments
- Regulatory fines
What is cyber liability insurance?
Cyber liability insurance is part of a cyber insurance policy. It protects against third-party claims that say the business didn't properly or effectively secure personal and private data. Employee error and failure to implement safeguards could be listed as the cause of the data breach.
How does cyber insurance help companies mitigate risk?
Cyber insurance won't remove the risk you face from bad actors or employee errors; systems can still be vulnerable, and you could still experience a loss. However, starting with the cyber insurance risk assessment, you can get a better handle on your most significant risk areas so you can avoid common business scams or mitigate an incident's damage.
In addition to providing insight, cyber insurance helps pay for a data breach's resulting damages. Many businesses wouldn't be able to handle a security incident's out-of-pocket costs, such as reporting, credit monitoring and regulatory penalties, or pay a hefty ransom to get their business back up and running. Without cyber insurance, a business would have a challenging time surviving a cyberattack.
How do I shop for cyber insurance?
You have many options when shopping for a cyber insurance policy. Think of the insurance company as a partner in protecting your business from cybercrime. This is why it's wise to work with a company that will provide a cyber insurance risk assessment to help you understand your risk factors. The best liability insurance providers will help you identify your biggest problems and offer solutions to help shore up vulnerabilities.
Your carrier is also your partner if and when you have to file an insurance claim. Good insurance carriers have expert teams to mitigate losses during a crisis. For example, in a ransomware attack, your carrier may provide a negotiator or offer technology experts to help shut down your systems or restore them when possible.
As you would when choosing any business insurance policy, inquire about exclusions and understand how policy limits work. You may be able to set a retroactive date on a cyber insurance policy. Some policies allow for this because insurance carriers understand that you may not be aware of a breach for some time. You'll pay an additional premium for a retroactive date, but this could be well worth it if you haven't previously protected your company from cyber risks.
How much cyber security insurance is enough?
Your cyber insurance risk assessment should help determine how much cyber insurance you'll need to insure your business sufficiently. Most small companies start with a baseline policy with $1 million in coverage for each occurrence and in the aggregate. There is usually a $1,000 deductible for a baseline policy.
Increase the coverage if you have an extensive database. The more data you keep, the more you become a target, and the more exposure you have to higher fines, fees and costs. Businesses with multiple servers or employees who work remotely may also want to consider higher limits.
Should I get cyber insurance?
Consider your reliance on technology to store data, process orders and conduct business. If you rely heavily on technology and would be unable to operate if your computer systems got hacked, or if you wouldn't be able to afford the costs associated with a data breach, you need cyber insurance.
It's estimated that ransomware attacks happen every 11 seconds. Hackers are targeting both large and small companies. It's often easier for hackers to breach smaller companies and hold their operations hostage for a ransom. Don't wait for a problem to happen before you consider getting a policy and shoring up your defenses with a cyber insurance risk assessment.