Some people rely solely on cyber insurance when it comes to a company’s security. They think, “Why bother with MFA, employee training, or software updates? If something happens, cyber insurance will cover all the costs.” However, they overlook a critical point.
Cyber insurance doesn’t cover all cyber incidents. If an incident is due to negligence or employee mistakes, there won’t be any payouts. Cyber insurance has many specifics, which is why we’ve prepared this article.
In this blog, we explain what cyber insurance is, which costs it covers, who needs it, and how it works. Also, we’ll share some advice on how to choose the right cyber insurance policy.
What is Cyber Insurance?
Cyber insurance, also known as cyber liability insurance, is a policy businesses can buy to reduce the risks of online operations. It is designed to protect businesses from the effects of cyberattacks, data breaches, cyber extortion, and ransomware. It also covers costs related to dealing with the incident, such as investigations, crisis communication, legal fees, and customer refunds.
Like other types of insurance, cyber insurance is offered by providers who also sell business insurance, such as errors and omissions, liability, and property insurance. These policies usually include:
- First-party coverage: Covers losses directly affecting the insured business.
- Third-party coverage: Covers losses experienced by other businesses due to their relationship with the insured organization.
What Is Covered by Cyber Insurance?
Cybersecurity insurance generally covers first-party losses from data destruction, hacking, extortion, and theft. Policies can also include legal expenses and related costs. Coverage can vary but typically includes:
- Customer Notifications. If a data breach involves the loss of personally identifiable information (PII), companies must notify their customers. Cyber insurance can help cover the costs of this notification process.
- Identity Restoration. Helps organizations restore personal identities for affected customers.
- Data Recovery. Pays for the recovery of data compromised in an attack.
- Ransom Demands. Assists with costs related to ransomware demands, though some agencies advise against paying ransom.
- Data Breaches. Covers incidents where personal data is stolen or accessed without authorization.
- System Repairs. It covers the cost of repairing systems damaged by a cyberattack.
- Attack Remediation. Covers legal fees from privacy violations and helps hire experts to remediate attacks or recover data.
- Partner Liability. Covers losses incurred by business partners with access to company data.
What Does Cyber Insurance NOT Cover?
A cybersecurity insurance policy usually won’t cover issues that were preventable or caused by human error or negligence. Here are some examples:
Weak security practices
If an attack happens because a company has poor configuration management or inadequate security measures.
Employee mistakes
Any cyberattack resulting from errors made by the organization’s employees.
Insider threats
Loss or theft of data due to an insider attack, where an employee is responsible.
Previous incidents
Breaches or events that took place before the organization got the policy.
Unresolved vulnerabilities
If a data breach occurs because the organization failed to fix a known vulnerability.
Tech system upgrades
Costs related to enhancing technology systems, such as securing applications and networks, are also excluded.
So, we recommend not relying solely on insurance; it will only help if you also prioritize cybersecurity.
IT Requirements for Cyber Insurance
Access Management
- Implementation of Multi-Factor Authentication (MFA) for user logins, remote access, email, and privileged accounts.
- Use of role-based access controls (RBAC) to limit access to sensitive systems and data.
- Secure password policies (e.g., regular updates, complexity requirements, and avoiding reuse).
Endpoint Security
- Installation of antivirus and anti-malware solutions on all endpoints (workstations, servers, and mobile devices).
- Use of endpoint detection and response (EDR) tools for advanced threat detection.
- Regular updates and patch management for operating systems and applications.
Network Security
- Deployment of firewalls and intrusion detection/prevention systems (IDS/IPS) to monitor and secure network traffic.
- Implementation of network segmentation to isolate sensitive systems and limit lateral movement.
- Secure virtual private network (VPN) usage for remote access.
Data Protection
- Encryption of sensitive data, both at rest and in transit.
- Regular data backups stored securely offline or in a separate network segment.
- Policies for securely handling, storing, and disposing of sensitive data.
Vulnerability Management
- Regular vulnerability scans and penetration testing to identify and address weaknesses.
- Implementing a process for patch management to quickly address known vulnerabilities.
- Use of threat intelligence to stay informed about emerging risks and exploits.
Employee Training
- Cybersecurity awareness training for all employees, focusing on identifying phishing, social engineering, and other common attack vectors.
- Regular updates and testing, simulated phishing campaigns to ensure employee readiness.
Club Support can help organize preventative maintenance and technologies to secure your membership club. We guarantee safety for your workstation, server, device, and people. Contact us to discuss all the details.
Why is Cyber Insurance Important?
A prime example is the Marriott Hotel.
In September 2018, Marriott International discovered a breach that exposed the sensitive information of 500 million Starwood guests. The investigation revealed that unauthorized access to the Starwood network had been occurring since 2014, with data including names, addresses, phone numbers, passport numbers, and payment details being copied and encrypted.
Only by November 19, 2018, Marriott decrypted the data. After the breach, Marriott accelerated security enhancements and began phasing out Starwood systems.
By March 2019, the company had spent $28 million dealing with the breach, but their net loss was only $3 million. By May, they reduced their losses to just $1 million. How did they manage that? Cyber insurance covered most of the initial costs of the crisis.
In 2020, the UK’s ICO fined Marriott £18.4 million (reduced from £99 million) for failing to secure customer data. Of course, there were also indirect losses, but without cyber insurance, the situation would have been much worse.
Who Needs Security Insurance?
While each organization’s risk profile is unique, most companies can benefit from cyber insurance. Any business that handles electronic data, such as customer contacts, sales information, PII, or credit card numbers, can benefit from cyber insurance.
Also, the following industries should consider buying insurance:
Healthcare Providers
Healthcare companies often handle sensitive patient data, making them prime targets for data breaches and cyber threats. According to IBM, the average cost of a healthcare breach is $10 million annually. Cyber insurance is crucial for these organizations to mitigate financial and legal risks associated with data breaches and HIPAA violations.
High-Revenue Companies
Organizations with significant revenue streams are attractive targets for hackers due to the potential financial rewards. Cyber insurance can help protect these companies from the financial damages resulting from cyberattacks and data breaches.
Financial Institutions
Banks and credit unions deal with sensitive personal information, including social security numbers, making them attractive targets for cybercriminals. Cyber insurance can help these institutions recover from financial damages caused by cyberattacks.
Government Agencies
Government agencies manage vast amounts of private information across various levels. Cyber insurance can protect these institutions from cyberattacks and ensure the continuity of public services.
How to Choose the Right Cyber Insurance Policy?
Choosing the right cyber liability coverage plan for your company involves understanding your specific risks and needs. Start by evaluating the type of data you handle and the common cyber threats in your industry. Then, thoroughly review the policy’s terms and exclusions.
Opt for a reputable insurance company that specializes in cyber risks and can meet your needs. While it’s important to understand cyber insurance yourself, consulting an experienced broker can simplify the process and help you navigate the market.
Tips to Mitigate Cyber Risk
Cyber threats are a significant concern for businesses of all sizes. A strong cybersecurity strategy should combine cyber insurance, employee training, robust access control, and regular vulnerability assessments. Here are some steps to strengthen your cybersecurity:
- Regularly update software. Keep your software updated to protect against the latest malware and vulnerabilities.
- Control network access. Implement a zero-trust framework and grant network access only as needed.
- Educate employees. Train employees to recognize and respond to threats like phishing.
- Develop an incident response plan. Identify potential risks, form an incident response team, and create a clear action plan for various cyberattack scenarios.
- Conduct regular Security Assessments. Regular assessments help detect vulnerabilities before they become serious threats.
Does Cyber Insurance Mean Cyber Defense?
Cyber insurance should complement, not replace, strong cyber risk management. Every company should have cyber insurance, but it’s meant to reduce the impact of a cyberattack, not prevent it. The policy should support the security measures already in place.
When issuing a policy, insurers evaluate a company’s cybersecurity practices. A strong security posture can lead to better coverage, while a weak one can complicate the process and result in poor insurance options.
Additionally, not investing in proper cybersecurity measures can prevent companies from qualifying for cyber insurance or lead to higher prices.
We are here to help
Investing in cybersecurity can significantly reduce the risk of data breaches and cyberattacks, making your business a lower-risk client for insurers. As a result, protected customers often benefit from better insurance terms and lower premiums.
If your club needs help with cybersecurity, contact us. With over 20 years of experience in the Club industry, we are the leading IT service company. Our team is ready to assist you in enhancing your cybersecurity measures and ensuring your data is secure.
