Cyber Insurance: A Remedy to Mitigate Cyber Threats

Insurance CIO Outlook | Thursday, June 27, 2019

Cyber InsuranceAs cybersecurity threats evolve, companies are looking at ways to rationalize and reduce risks. It is important for firms to question the value of cyber insurance before buying one.  

FREMONT, CA: Digitalization has propelled businesses into rapid growth and transformation, but the chances of security attacks loom large. Cybersecurity attacks are becoming commonplace. Insurance companies have now come up with cyber insurance to cover companies who want to safeguard themselves against damages caused by cybersecurity issues. Damages to IT infrastructure or loss of data can be very costly for companies, and insurance policy might be a good idea.

Previously, only some aspects of security attacks were covered under various other insurance policies, but now, specialized cyber insurances have become more common. The insurance policies available in the market currently cover losses related to information damage or loss, and damaged equipment, systems, or networks. Some policies also provide cover against a damaged reputation. Risks are mostly classified into the first party, and third party risks and insurance companies offer protection against both the categories.

First-party insurance is meant for a company's own assets while third-party insurance deals with the assets of customers. The total value of cyber insurance premiums is forecasted to reach $7.5 billion by 2020. Companies ought to be very cautious while buying any insurance product. Ideally, a good amount of research and inquiry must go in. A comprehensive, stand-alone policy is the best option for companies. Many firms offer a customizable policy which the businesses can plan according to their preferences. 

Understanding the terms and agreements in cyber insurance can be cumbersome. The threat scenario evolves continuously, and there are no fixed metrics against which a policy can be designed. Policies do not always evolve as rapidly as hacking techniques do. Hence, the criteria for protection, like which kind of attacks are covered, should be clearly discussed by companies and the service providers. A checklist of items for which a company wants insurance simplifies the buying process.

Malicious attacks have the power to destroy businesses. Any company which has invested in a lot of IT infrastructure or handles sensitive information should make space for a cyber insurance policy in the budget. Proper security measures and insurance coverage can make any company confident about fending off cybersecurity attacks.

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