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 Cyber Insurance

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The Top 5 Cyber Myths

Cybercrime is the fastest growing crime in the world, but standard property or crime insurance policies can be restrictive in the cover they offer.

The widespread use of technology and the internet now means that your business is exposed to the world’s criminals and is vulnerable to attack at any time of the day or night. For example, social engineering scams are becoming a pandemic in the business world, leading to significant losses for companies of all types. Cyber insurance is at the forefront of protecting against this new wave of crime, providing cover for a wide range of electronic perils, from wire transfer fraud to ransomware.

Technology systems are critical to operating your day-to-day business but their downtime is not generally covered by standard business interruption insurance.

Almost all businesses rely on computer systems and other technology to conduct their core business, from electronic point of sales software to back office work flow management systems. In the event that these systems are brought down, a traditional business interruption policy would likely not respond. Cyber insurance can provide cover for loss of income and extra expense associated with a cyber event.

 

Data is one of your most important assets yet it is not covered by standard property policies.

Most businesses would agree that data or information is one of their most important assets and worth many times more than the physical equipment that it is stored upon. Yet most business owners do not realize that a standard property policy would not respond in the event that this data is damaged or destroyed. A cyber policy can provide comprehensive cover for data restoration and even re-creation in the event of a loss.

Complying with breach notification laws costs time and money.

Breach notification laws are now commonplace across many territories, and among other things, generally require businesses that lose sensitive personal data to provide written notification to those individuals that were potentially affected or risk hefty fines and penalties. Australia’s Notifiable Data Breaches Act, Canada’s Digital Privacy Act, Europe’s General Data Protection Regulation, and several US state laws make it a legal obligation to notify, and there is also a growing trend towards voluntary notification in order to protect your brand and reputation. Cyber policies can provide cover for the costs associated with providing a breach notice even if it’s not legally required, and can also cover the associated regulatory fines and penalties.

A good cyber policy provides access to a wide range of incident response services.

Responding to a cyber incident requires a range of specialists – from IT forensics firms to specialist PR agencies – that help deal with both the immediate aftermath as well as the longer term consequences of a cyber event. Small and medium sized businesses, in particular, are facing an uphill battle; not only are they increasingly being targeted by cybercriminals but they are also unlikely to have the range of required incident response specialists in-house. The good news is that cyber insurance can provide easy access to these services, helping companies more easily negotiate the changing face of crime.

“We don’t need cyber insurance.  We invest in IT security…”
 

This might be the single most common objection to purchasing a cyber insurance policy.


Not purchasing a cyber policy because you have ‘good IT security’ is akin to suggesting that you don’t need theft  cover on a property policy because you have high quality locks on your doors, or fire cover because you have a sprinkler system in place. 


There is a big difference between vulnerability and risk. And while a client that has invested heavily in IT security may be less vulnerable to certain types of cyber attack than an organisation that has invested very little, they still have a risk exposure. Cyber threats are rapidly evolving and there are a plethora of ways in which attackers can access networks.

Even large corporations that spend vast amounts of money on IT security every year still get hit.


People are often the weakest link in an organisation’s IT security chain. According to IBM, 95% of successful cyberattacks and incidents are the result of human error.

Technology and training may reduce the likelihood of an employee accidentally clicking on a malicious link in an email, or from being tricked into transferring funds to a fraudster as part of a social engineering attack, but it can’t eliminate those risks completely. And no amount of investment in IT security can stop employees from leaving their laptops on a train or a rogue employee from releasing sensitive data on the internet.

The short answer No matter how much a company invests in IT security, they will never be 100% secure. The purpose of an insurance policy is to respond in the event that the worst happens

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“We outsource all of our IT, so  we don’t have an exposure…”


Using a third party for IT might change your exposure, but it doesn’t eliminate it. 


Consider what happens in the event of a data breach. If an organisation outsources their data storage to a third party and that third party is breached, they could be forgiven for thinking that responsibility for notifying affected individuals and dealing with any subsequent regulatory actions that may arise would rest with the breached third party. 
But that’s generally not the case. 


If an individual has entrusted their personal data to an organisation, it is the organisation that is responsible for looking after that data, regardless of whether or not a third party is utilised to look after it. If that data is lost or stolen, then it is the organisation that will be accountable for any notification requirements, regulatory investigations, fines or penalties that do arise, and it will be their reputation that suffers, not the third party’s. 


Of course, it isn’t just breaches of data at outsourced IT providers that could leave businesses exposed. Many businesses rely on third parties for business critical operations, and should those providers experience a system failure, it could have a catastrophic effect on the company’s ability to trade, resulting in a business interruption loss and additional costs incurred to continue trading.


Claiming back these losses from a third party can also prove to be easier said than done. Most third party technology service providers tend to have standard terms of service that completely limit their liability in the event that a breach or system outage causes financial harm to one of their clients

The short answer Even if you outsource your IT, the chances are you’re still liable. Assuming you’ll be successful in claiming back damages from a third-party is a risky gamble.

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“We don’t collect any sensitive data, so we don’t need cyber insurance…”


Cyber insurance is about much more than data breach and privacy risk. In fact, two of the most common sources of cyber claims are funds transfer fraud and system damage or business interruption as a result of ransomware.


Funds transfer fraud is often carried out by criminals using fraudulent emails or conducting social engineering over the phone to request the transfer of funds from a legitimate account to their own. In many cases, fraudsters will pose as a senior executive appearing to give urgent instructions to a junior employee. Any business that wires money to and from a business bank account is susceptible to funds transfer fraud, and many of the victims of these losses hold next to no sensitive personal data.


Additionally, 2017 saw the WannaCry and NotPetya ransomware outbreaks cripple many organisations within the manufacturing and logistics industries. These attacks did not involve the theft of data, but rather the freezing or damage of business-critical computer systems. NotPetya alone is estimated to have cost businesses over £1 billion, and nearly all of that loss was due to operational disruption leading to large drops in turnover and the significant cost of rebuilding or replacing systems. The core exposure in both cases was not data breach but system business interruption and system damage. 

The short answer Any business that relies on a computer system to operate, whether for business-critical activities or simply electronic banking, has a very real cyber exposure.

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“Cyber attacks only affect big business. We’re too small to be  a target…”


We’ve all heard about major corporations falling victim to cyber attacks because they’re reported in the news. But what you don’t often hear about is the small law firm that transfers £100,000 to a fraudster as part of a social engineering scam or the private hospital unable to use their computer systems for days because of a destructive malware attack. Just because events like these aren’t reported in the mainstream media doesn’t mean they aren’t happening.


In fact, attacks against smaller organisations are now so frequent that they are often not considered newsworthy. A recent Verizon report found that 58% of victims were categorised as small businesses.


Cybercriminals see smaller organisations as low hanging fruit because they often lack the resources necessary to invest in IT security or provide cyber security training for their staff, making them an easier target.

The short answer Cyber criminals target the most vulnerable companies, not just the most valuable.
 

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“Cyber is already covered by other lines of insurance…”


Cyber insurance emerged as a standalone product specifically to fill the gaps that more traditional insurance products have been unable to fill.


Property, crime and professional liability are three of the most common lines of insurance assumed to include some form of cyber cover, but they often fall well short of the cover found in a standalone policy. Property insurance policies, for example, have often included some form of sublimit for data restoration costs, but it was developed as an add-on with narrow cover and property insurers have often lacked the expertise to deal with a claim involving data theft or damage. 


Likewise, crime insurance policies have only recently started to give cover for social engineering attacks, but generally speaking, the social engineering coverage on cyber policies is broader and has less onerous terms than a traditional crime policy. 


Similarly, some professional liability policies offer limited cover for suits arising from data theft, but these policies do not tend to cover any of the first party costs associated with responding to an event, which can be the most important part in determining how the event unfolds. 


So, while there may be elements of cyber cover existing within traditional insurance policies, it tends to be only partial cover at best. Standalone cyber policies will generally provide broader cover with less onerous terms and are purpose-built for true cyber exposures.


Most importantly, standalone cyber policies provide access to an incident response service, while traditional policies won’t. A property policy does not generally give you access to technically qualified incident response specialists who know what to do when ransomware has encrypted your systems. A traditional crime insurer is unlikely to be able to help when cybercriminals have stolen your data and are holding you to ransom to prevent them from publicly releasing it. A typical professional liability policy won’t be able to effectively manage the notification and crisis management costs associated with responding to a rogue employee posting confidential data online. A standalone cyber policy does all this and more, and brings a level of expertise to handle cyber events effectively and efficiently, with minimum disruption and financial impact to the business.

The short answer Some overlaps exist (as they do with all lines of insurance) but traditional insurance policies lack the depth and breadth of standalone cyber cover, and won’t come with experienced cyber claims and incident response capabilities.
 

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If you would like a quotation for Cyber Insurance Cover or to discuss the subject further, please contact the team on 0113 8800 869 or click on the button below and we will call you back at a time convenient to you.