Cyberattacks can cause major loss of revenue for businesses and other groups of all sizes. As a result, cybersecurity insurance is being discussed more and more. The prospect of getting money back after an attack becomes increasingly appealing. But, is it right for every organization? What are the pros and cons? Who already has it? And, who needs cybersecurity insurance?
The New World
A Sophos survey found that 84% of its 5,000 respondents have a cybersecurity insurance policy. This service is sometimes also called cyber-liability insurance.
A report by cybersecurity insurance provider Zurich North America and Advisen Ltd. found that the specific risks managers want to insure against include:
- Bricking (when a cyberattack renders a device unusable) – 72%
- Contingent business interruption – 72%
- System failure – 70%
- Funds transfer fraud – 66%
- Social engineering – 66%
- Internet media liability – 63%
- Reputational harm – 60%
More than half of companies surveyed (55%) bought a standalone cybersecurity insurance policy, while 13% acquired it as part of a larger policy.
The Zurich and Advisen survey found that insurance coverage purchases have more than doubled since 2011. This is connected in part to the pandemic, which increases the potential for ransomware attacks and major business disruptions. Both the chance and the cost of an attack are higher now than ever.
Cybersecurity Insurance Cons
There could be some downsides to insurance.
1. Inadequate coverage: Sophos found that many of the cybersecurity insurance policies their survey respondents have aren’t adequate for the job. For example, only 64% have insurance that covers ransomware, one of the best reasons to have coverage in the first place.
2. Attacks can be costly: About half of respondents suffered ransomware attacks within the past year. And, the total cost of these attacks rose. When the ransom is paid, it’s the cybersecurity insurance company that pays in 94% of the cases among insurance policy holders. There are also some good reasons not to pay ransoms at all, including the probability that paying a ransom could incentivize future attacks by proving that victims will pay.
3. Cybersecurity insurance can be too expensive: The growing severity of ransomware attacks in recent years has sent premiums through the roof, some rising by 25%, according to Reuters.
4. Lack of trust: This may make it hard to get business leaders on board. Groups who don’t buy insurance say the cost or the lack of buy-in from business leaders are the top reasons, according to the survey.
A lot of people still don’t see the need for proactive measures like cybersecurity insurance. Despite a remote work-related rise in attack frequency and impact, 81% of companies have not changed their cyber defense spending as a result, according to Zurich and Advisen.
Cybersecurity Insurance Pros
There are upsides, even beyond the obvious one of having an insurance policy to pay back financial losses, such as:
1. Data breach coverage: Cyber insurance policies cover the extended costs of security fixes, identity theft protection and people affected by any breach from legal action.
2. Business interruption reimbursement: Cyber liability policies can help cover loss of income during interruptions caused by attacks.
3. Cyber extortion defense: Cyber liability insurance help recoup any losses as a result of cyber extortion.
4. Legal support: Businesses often turn to legal assistance after a cyber attack, which can be costly. Cyber liability insurance can help companies afford proper legal help after a cyber attack.
And, the groups who do have cybersecurity insurance find occasions to use it. The number and impact of data breaches is on the rise. Insurance company Willis Towers Watson says claim frequency rose by about 18% in 2020. A report this summer found that data breaches now cost companies close to $4 million (an average of $3.86 million per attack).
The business value of good cybersecurity practices is high and growing, even more so in finance, health care and other fields where the risks and costs of attacks are high. It’s also true that the shift toward working from home in 2020 and now 2021 has changed the landscape in ways nobody predicted. It’s important to balance cost and need against benefits. But, our verdict is that good cybersecurity insurance is the best policy.