Cyber insurance: What exactly is cyber insurance and why you need it?

Well, Cyber insurance cannot defend your organization from cybercrime, but it can maintain your business on secure financial foothold in case a noteworthy security breach occurs.In today’s digital era technology, social media and dealings over the internet are assuming front seat in how most organizations carry out business and reach out to potential customers these days. One should understand that these vehicles are also under potential threat and act as gateways to cyber attacks. It can be initiated by run-of-the-mill hackers, criminals, insiders or even nation states, cyber attacks are prone to take place and can lead moderate to harsh losses for organizations whether large and small.Hence as part of a risk management strategy, organizations characteristically must decide which risks to avoid, accept, control or transfer. Transferring this risk factor is where cyber insurance steps in.
Understanding cyber insurance?
A cyber insurance policy also popularly known as cyber risk insurance or cyber liability insurance coverage (CLIC), is crafted to facilitate an organization alleviate risk exposure by making up for costs involved with recovery after a cyber-related security breach or similar event. With its roots in errors and omissions (E&O) insurance, cyber insurance began to become popular 2005, with the total value of premiums forecasted to reach $7.5 billion by 2020. As per the reports by PwC, over one-third of U.S. companies at present buy some kind of cyber insurance.
The ever growing numbers point towards the organizations needs hence cyber insurance is carving its own niche in the market.
Next, let’s understand what does cyber insurance cover?
Cyber insurance in general covers expenses connected to first parties as well as claims by third parties. Although there is no standard for underwriting these policies, the below mentioned are universal reimbursable expenses:
• Investigation: A forensics investigation is essential to settle on what took place, how to repair damage and how to put off the similar kind of breach from taking place in the future. Investigations may entail the services of a third-party security firm, as well as working together with law enforcement and the FBI.
• Business losses: A cyber insurance policy may take in similar items that are covered by an errors & omissions policy (errors due to negligence and other reasons), along with the monetary losses experienced by system downtime, business interruption, data loss recovery and costs involved in managing a crisis, which may entail repairing reputation damage.
• Privacy and notification: This comprises of necessary data breach notifications to customers and other affected parties, which are mandated by law in many jurisdictions, and credit monitoring for customers whose information was or may have been breached.
• Lawsuits and extortion: This encompasses legal expenses linked with the release of confidential information and intellectual property, legal settlements and regulatory fines. This may also cover the costs of cyber extortion, such as from ransomware.