How can Cyber Insurance protect your business?

a blog post by Sam Keogh, Corporate Account Handler at COHIBL

 

With technology constantly evolving, the cyber risk to businesses and the frequency and severity of claims continues to grow.  In this blog we will try to give a simple guide to the risks your business faces and the short- and long-term consequences you could suffer from in the absence of an effective Cyber policy.  We will also delve into what a Cyber policy can do to mitigate losses and get you back to trading effectively as quickly as possible.

 

Firstly, what is Cyber Insurance?

Cyber insurance is a crucial safety net for your business in the digital age.  It’s a specialised insurance policy that’s designed to protect you against the financial fallout from cyber incidents.  These incidents can include data breaches, ransomware attacks, or any event where your digital systems or sensitive information are compromised.

It covers a direct financial loss to your business arising from a cyber event.  Cyber insurance also covers liability actions that might be brought against you arising out of a cyber event and includes defence costs, civil damages, and compensation payments to third parties that have been affected.

Insurers will appoint a specialist firm to assist you with the management of the cyber event – the costs of specialist assistance can be considerable.

 

Some Common Exclusions

Court Jurisdiction

It is always worth checking which territories a cyber policy applies to.  Policies purchased in the UK normally include territories in the European Union and much of the rest of the world in their cover, however North America is often excluded.

Fines and Penalties

Cyber insurance will not cover criminal, civil or regulatory fines, penalties or sanctions that your business is legally obliged to pay.

 

What are some of the common Cyber Attacks your business could fall victim to?

Social Engineering Attacks: Social engineering involves manipulating individuals into divulging confidential information through techniques such as impersonation, pretexting, or eliciting information through casual conversation.  Once trust has been gained hackers will ask you to do things on their behalf like transferring funds etc.

Distributed Denial of Service (DDoS) Attacks: DDoS attacks aim to overwhelm a network, server, or website with a flood of traffic, rendering it inaccessible to legitimate users.  This can lead to downtime and financial losses.

Phishing Attacks: Phishing involves sending deceptive emails or messages to trick individuals into revealing sensitive information, such as login credentials or financial details.  These attacks can be targeted at employees within the organisation.

Malware: Malicious software, including viruses, worms, and trojans, can infect computer systems and networks.  Malware can be used to steal sensitive information, disrupt operations, or gain unauthorised access to systems.

Ransomware: Ransomware attacks involve malicious software that encrypts files on a victim’s system, rendering them inaccessible until a ransom is paid.  This type of attack can have severe consequences for businesses, causing data loss and disruption of operations.

 

What are the consequences of not having Cyber insurance in place?

The consequences of going without cyber insurance can be quite severe.

Cyber incidents can be expensive to resolve and, without insurance, the financial burden falls squarely on your business.  This can be overwhelming and can strain your finances.  Alongside financial strain, you also need to consider potential reputational damage.  Your business’s reputation is hard earned but easily tarnished. If you’re hit by a cyberattack and lack the means to manage the fallout, it can lead to long-term damage to your reputation and customer trust.

One of the other areas that can go overlooked is a prolonged recovery period.  If you do not have cyber insurance in place, recovery can be slower and more challenging.  This results in extended downtime and increased losses.

 

How can having a Cyber policy in place help your business recover in a prudent manner?

Financial Support: It provides the necessary funds to deal with the aftermath of an attack. This includes covering the costs of investigations, data restoration, legal defence, and crisis management.

Expert Guidance: Insurance providers often have experts who can guide you through the recovery process, offering insights into how to manage the situation effectively.

Speedier Recovery: With the financial support and guidance, you can recover more swiftly, minimising the disruption to your business operations.

 

How much of a growing concern are Cyber Attacks to your business?

The government carried out a survey in 2023 and they estimate that, across all UK businesses, there were approximately 2.39 million instances of cybercrime and approximately 49,000 instances of fraud as a result of cybercrime in the last 12 months.

The average (mean) annual cost of cybercrime for businesses is estimated at approximately £15,300 per victim.  The sample sizes do not allow this cost calculation for charities.

In a nutshell, cyber insurance is a smart investment for any business in today’s digital world.  It’s a financial safety net, a recovery aid, and a reputation protector, all rolled into one.  Without it, you’re exposed to financial risks and potential damage that can be costly and challenging to bounce back from.