The cost of dealing with data breaches is beyond strengthening security procedures, repairing databases, or replacing lost laptops. Traditional business insurance is not enough to protect companies from cyber-crime. But do you wonder how does cyber insurance works?
Cybercrime is one of the most frequent types of crime, and yet it is not given the attention it requires. Individuals and businesses are susceptible to cybercrime. 2020 made conditions worse as companies had to work remotely without sufficient security measures.
India saw a 65% rise in cybercrime cases filed in 2020. Various small, medium and large-scale enterprises get affected by such crimes. To recoup the losses and expenses incurred while facing a cyberattack, it is wise to get cyber insurance.
The cyber security insurance process works like any other form of insurance. Cyber insurance is provided by many insurers who also provide other forms of business insurance, such as property insurance, errors and omission insurance, and liability insurance. Cyber insurance policies often include first-party coverage, which means losses that impact an organization, and third-party coverage, which means losses incurred by other organizations due to business relations with affected enterprises.
A cyber insurance plan helps an enterprise to pay for any financial losses that incur in the event of a data breach or a cyberattack. It also helps them cover the costs of legal services, investigation, crisis communication, and refunds to the customers.
Cybersecurity insurance typically includes first-party coverage of losses due to hacking, data extortion, data destruction, and data theft. The main areas covered by cyber insurance include:
- Data Recovery
Cyber insurance usually enables the business to pay for the recovery of data compromised by a cyberattack.
- Recovering personal identities
A cyber liability insurance policy helps an organization restore the personal identities of affected customers. Theft of personal identities is one of the scariest things that can happen to any individual. A stolen identity can help a criminal check into a hotel in London, United Kingdom while you are actually in Mumbai, India.
- Customer notifications
Enterprises are required to notify their customers of a data breach, especially if it involves theft or loss of personally identifiable information(PII). Cyber insurance helps businesses cover the cost of this process.
- System damage repair
The policy covers the cost of repairing computer systems and servers damaged by a cyberattack. It does not cover the cost of data recovery. It is important to read the fine print in each case.
- Ransom Demands
Cyber insurance can help enterprises to cover the cost of meeting extortion/data ransom demands of the compromised data. A lot of times, computation of this amount is difficult. In case intellectual property or competitive trade secrets are lost – identifying the amount to be reimbursed is tough. The amount spent in building this IP or competitive advantage is difficult to calculate and you may or may not get the full amount you believe the Insurance company must give.
Pricing the cyber risk depends on the organization’s revenue and operating industry. To qualify for insurance, the insurer will carry out a security audit. The information gathered from the audit will guide the type of policy the insurance company can offer and the cost of premiums.
Policies vary between different insurance companies. Therefore, it is best to visit Elephant and compare policies to ensure required provisions and protection are covered by the policy.