Many businesses have some form of liability insurance that provides protection against unforeseen events and transfers some of the organization’s risk to its insurance provider. If a covered event occurs, the provider will pay for some or all of the costs of recovery.
However, most liability insurance policies do not cover cyberattacks. Protecting the business against the costs of these incidents requires taking out a special cybersecurity insurance policy.
The Benefits and Downsides of Cybersecurity Insurance
A cybersecurity insurance policy enables an organization to transfer some of the risks of cyberattacks to a third-party provider. This can provide various benefits to the organization, including:
- Reduced Risk: If a covered cybersecurity incident occurs, the provider covers some of the costs of recovery. With the high costs of a data breach or ransomware attack, this can prevent an attack from putting an organization out of business.
- Specialized Expertise: In some cases, insurers provide their clients with access to specialists in the aftermath of an incident. This may make it easier for an organization to investigate and restore operations after a breach or handle the reputational impacts of a security incident.
- Regulatory Compliance: A growing number of data privacy laws have reporting requirements, both to regulators and customers. Cybersecurity insurance providers may foot the bill for customer notifications and other regulatory and legal penalties.
However, while cybersecurity insurance has its benefits, it’s not a perfect solution. Some of the limitations of cybersecurity insurance policies include the following:
- Limited Coverage: Cybersecurity insurance policies will only cover some of the costs of a cybersecurity incident, and the growth in ransomware and nation-state attacks and their associated costs has caused some providers to stop covering them. A cybersecurity insurance policy may not cover the main risks that an organization faces.
- High Premiums: As cyberattacks grow more common, providing cybersecurity insurance can be an expensive business. As a result, policy premiums have been increasing and can consume a significant portion of an organization’s cybersecurity budget.
- Response Focus: Investing in cybersecurity insurance involves accepting that a security incident will occur and taking steps to mitigate the costs. With limited budget and resources, the cost of cybersecurity insurance may reduce an organization’s ability to prevent incidents from occurring in the first place.
Purchasing cybersecurity insurance provides an organization with a level of protection against the worst impacts of a cybersecurity incident. However, cyber insurance has its downsides and may not be the best choice for every organization.
How MorganFranklin Can Help
The decision of whether or not to take out a cyber insurance policy should be part of an organization’s risk management strategy. In addition to transferring risk to an insurance provider, an organization also has the option to remediate, mitigate, or accept that risk. MorganFranklin experts can help with determining the best option for your organization and with deciding what types of cyber insurance coverage is right for your organization.
The growing costs of cybersecurity incidents have also inspired insurance providers to tighten their requirements for prospective clients. To take out a cybersecurity policy, your organization may need to be able to demonstrate that it has implemented security controls and achieved a certain level of protection. MorganFranklin experts can help your organization to identify any security gaps, assist in developing a strategy for closing them, and provide support through the process of selecting, implementing, and operating additional security solutions.