In the final analysis, the rationale for cyber insurance is the fact that there is no such thing as total data security.
This is, in fact, the rationale behind all kinds of insurance.
As a society, we have created these types of collective safety nets because there is no such thing as complete and total safety.
Truly "safe" automotive travel does not exist.
No home is ever 100% safe from fire, flood, theft, etc.
That irreducible fact is the reason for insurance of any kind.
But with data security, the landscape is also typified by the rapid transformation of risk.
The rationale for cyber insurance further depends on the increasing risks of cyber attacks and the growing sophistication of hackers.
The fact is that there is, and always will be, an ongoing arms race between the attackers of data and its defenders.
In this war, the strongest will always win, and that is why we have cyber insurance.
But there's more.
In the arena of modern commerce, there is more at risk than just the data of online merchants.
Every time your customers or clients make a purchase online, their data is endangered as it passes through your servers.
Inevitably, this means that government regulation has to get involved to ensure that customer data is protected.
This is arguably the biggest reason for cyber insurance.
This is because data is supremely vulnerable during any digital information exchange and because the potential fines and fees for noncompliance can be hefty.
To understand this more fully, we need to look at the state of data security as it stands.
Unfortunately, we think the reality of the situation is rather alarming.
When people use the word, "exponentially," it's almost always a gross exaggeration.
But not when it comes to the rate of the rise in cybercrime.
In 2023, the total cost of cybercrime across all industries in the US alone exceeded $8 trillion.
By 2025, it's expected to surpass $10 trillion.
Interestingly, the number of attacks has not risen in parallel to the severity of the attacks.
This means that cybercrime is, getting more severe faster than it is becoming more common.
That means not only are you more likely to be hit by a successful attack, but more attacks than ever have the capacity to destroy even stable businesses.
Insurance companies are probably the best source for stats on phenomena like this, and the insurance industry reports that cyber insurance claims are rising in number.
This is not surprising, but it supports the already credible claims made by Forbes and other news outlets.
Shockingly, reports of this kind have been coming out of the insurance industry since 2021, and the rate has been growing in that time as well.
Considering the cost of underwriting cyber liability in a climate where cyber risk cannot be expected to decline, the only sensible move is to invest before premiums rise any further and lock in current rates.
Fortunately, we have a wealth of data on these attacks, their frequency, severity, likely targets, and more.
Here are a few broad threat categories you might find illuminating.
The DHS has issued a number of warnings related to emerging cyber threats.
They say cyber espionage and election meddling are among the greatest threats in 2024.
Public safety, economic security, and key infrastructure are all vulnerable to attacks that could come from within our borders, from without, or both.
Supply chains are more vulnerable than ever.
It has driven up the cost of goods and services across all categories.
Unfortunately, this creates long chains of market and infrastructure vulnerabilities.
These vulnerabilities can be exploited by hostile governments, hackers, terrorists, and more - any of which are a real threat to businesses either directly or indirectly.
Underwriting standards have always been a primary determining factor in the cost of financial services, including insurance.
Cyber insurance is no exception.
As the prevalence and severity of attacks grow, so do the standards financial institutions place on underwriting.
This can make qualifying for coverage more difficult as well as more costly.
Among the greatest reasons for cyber insurance is the increasing cost and risk of regulatory issues.
As mentioned above, businesses are held liable for the data security of their clients and customers online.
When their data passes through your networks and they make a purchase, not only are they especially vulnerable, but because their data is on your property, anything that happens to it there may be your legal responsibility.
Phishing and ransomware attacks have been in the cross-hairs of data security people and thought leaders in this area for several years now.
They are certainly subjects of serious concern for the cyber insurance industry.
Ransomware is malicious coding that usually enters through links or files in an email.
Once it installs itself on the victim's computer, it seizes data for which the attacker then demands a ransom.
The recommended response is generally not to pay the ransom.
Of course, in some cases, the compromised data may be so valuable that paying the ransom can seem like the only option.
Phishing attacks are equally malicious and can be surprising, even to those who are aware of the danger.
Also known as cultural attacks, phishing attackers target a specific individual who has special authorization to sensitive data.
Common targets are executive liaisons, remote workers, and social media branding curators, just to name a few.
Attackers of this kind will appear in person or call, and try to convince the target that they have a special case in which they need to be given a password.
More subtle attempts may involve trying to glean information that will make guessing a password easier.
Either way, it's called phishing because they don't need to be successful every time for it to be profitable.
They just need to keep trying until a victim takes the bait.
It might be helpful to break down the ways current and coming changes to the cyber insurance industry can be expected to affect your business.
They are;
Rising Premiums: As cyber threats continue to become more threatening, the cost of insuring against them naturally rises.
The most reliable defense against this is doing all you can to keep risk at a minimum and to lock in early rates when possible.
High retention and deductibles: At the same time as premiums increase, the cost of keeping your coverage is also likely to go up.
Once again, the best defense against this is following all of your insurance provider's advice in mitigating risk.
Your insurance company has a vested interest in your data security and will offer you useful guidance to that end.
Reduced capacity: Naturally, the rising cost of coverage and increased complexity of qualifying for it can reduce a company's capacity for actually putting up any meaningful defense against attacks.
Maybe more importantly, it can take valuable capital away from your productivity processes, cutting into your bottom line more directly.
Tighter coverage: Yet another likely consequence of all these changes is not only the elevated cost of coverage, but the decreased capacity of the provided coverage to protect you.
As mentioned, your insurance provider will have a vested interest in helping you avoid any successful attack on your data.
You will be expected to adhere to their advice as closely as possible.
Failure to do so may cost you your qualifying status for cyber insurance.
Fortunately, the path to meaningful cyber security is fairly straightforward.
There are numerous ways to accomplish this, all of them as important as the next.
They include using quality anti-malware software, good hardware and software maintenance, and the ability to store the most critical data you have offline when possible.
These, of course, are just a start.
Cultural attacks in particular make team training a necessity.
Every person in your workforce should know not only how to prevent attacks likely to come through their authorized access type, but also through those of their closest coworkers.
Further, you should create a culture of security surrounding social media and online portals related to the workplace.
A good VPN is something anyone with any data online whatsoever should have.
It is a strong but simple level of protection often equated with the lock on the front door.
Sure, it's inexpensive and can be defeated, yet without it, an attacker can easily just walk right in and take whatever they want.
Different insurance carriers will specialize in serving the needs of specific types of industries.
You are likely to be best served by one that specializes in covering merchants in your field.
Finally, there are multiple types of cyber insurance coverage.
An insurance carrier that specializes in your industry will be almost certain to understand the needs of your organization.
Either they will have the tools and capabilities needed to cover you properly, or they will be able to recommend a carrier that does.
To learn more about the state of cyber insurance and cybersecurity as a whole, check back regularly, or get in touch today.
The threats are constantly changing, as are the recommended defenses.
As always, our team is here to help.
https://content.naic.org/sites/default/files/index-cmte-c-Cyber_Supplement_2020_Report.pdf
https://www.washingtonpost.com/politics/2023/09/15/dhs-warns-about-2024s-cyberthreats/