You have either been hacked or are being attacked as we speak or you will be in the future. It’s clear that Cyber insurance is a subject that is not often discussed openly and this is an area we are all learning about.
I recall the first time as a CIO being consulted in a management risk committee about the degree of cyber insurance that we should take as insurance cover. The discussion was quite hypothetical and there was not that much detail that was considered.
But with the increases of cyber security hacks over the last few years, and that includes many high profile ones on household names. We have also witnessed that the insurance premium costs have moved with the increased level of risk.
Is this just a crutch?
In a recent interview that I had with a CTO from a large enterprise, it was suggested in those exact words that Cyber Insurance is actually a crutch.
It doesn’t replace the need for good cyber security practices or provide you any real level of protection. Insurance in simple terms has been developed as a form of risk sharing. By definition it is:
“An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss ordamage in return for payment of a specified premium.”
More specifically cyber security insurance:
Cyber-insurance is an insurance product used to protect businesses and individual users from Internet-based risks, and more generally from risks relating to information technology infrastructure and activities
Ok, so I might be interested in buying this coverage. What is exactly is covered? When we take a look inside one of these policies, we will see that there are standard and optional features. Below is an example of an actual policy.
Data liability: covers the financial consequences of losing or misappropriating customer or employee data.
Electronic data: covers the cost of restoring, recollecting or recreating data after a leak or breach.
Fines and investigations: covers the potentially significant costs and expenses of a data protection regulator’s investigation and fines following data security breaches.
Crisis management and breach coaching: This policy provides access to a cyber-incident response team from industry specialists and covers the PR costs of reducing the damage it could cause to your reputation. Includes forensic services following a data breach; assistance to repair company and individual reputations; breach coaching and associated notification costs.
Multimedia Liability (optional): covers the damages and defence costs incurred in connection with a breach of third party intellectual property, or negligence in connection with electronic content.
Cyber/Privacy Extortion (optional): covers any ransom payments to third parties required to end an extortion threat.
Business/Network Interruption (optional): Covers the loss of net profit due to an interruption to the customer’s network following a cyber breach.
I’m sure that each of these policies will have slightly different conditions and also degree of coverage. Like any other shopping – you will need to carefully compare and understand what risks you want covered and what degree of risk that you will accept.
There is some movement of insurance companies starting to put limits, to cap the size of losses. The truth is as the Cyber Security product is still fairly new, this means that the terms and conditions are more different than the same at the moment.
Advent of Mandatory Data Breach Notification
In the meantime the Federal government has introduced a new mandatory data breach notification scheme as a measure to help detect and prevent cyberterrorism and cybercrime.
We would expect that this introduction of mandatory data breach notification laws will be a major driver for Australian businesses to accelerate the adoption of cyber insurance products.
I would expect that premiums should eventually settle down, as the Underwriters start to better understand factoring risk for different businesses. Moreover this also will improve as businesses start to better understand how to improve what they have in their cyber defences.
What can you do?
For many first time buyers, this is about demonstrating that you have a comprehensive and well tested cyber security plan. By proving that you have practiced and able to cope with threats, then your premiums will be adjusted accordingly.
Clearly businesses should not think they are protected simply because they have cyber insurance. The insurance is there for to assist you with certain scenarios that you regard as reasonably high risk.
One thing is for sure and that is when you have a breach or a cyberlocker attack – no amount of insurance will restore your credibility in the marketplace.
Just like you do with other insurance policies, be aware of what’s not included. Let’s take a simple example from the above data breach insurance policy, just be sure to ask about effective dates.
We all are aware that the average time to detect a breach is 200+ days. Therefore are we now covered or do we have to wait for 200 days to pass? Also what happens in the case of a BEC (Business Email Compromise), our staff have wired monies to what they think is the CEO.
Would this be covered? In many instances, it actually won’t be as this while there may be a email breach that allows the hacker to initially make contact, the actual monies have been transferred due to poor manual controls.
The act of buying insurance will require an increasing degree of due diligence and also self declaration of what measures you have or haven’t got in place. I’m sure that this will be confusing process and while you may use a broker to assist you, just imaging going through getting this costed twice to get two quotes.
It is going to be painful and require significant time investment.
Cyber Insurance – Yes please. But can we make it easier?
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