In 2023, there was a 72% increase in data breaches since 2021, which has previously held the all-time record. In response to this growing frequency of cyber threats, cybersecurity insurers have significantly revised their policies for businesses, making them more stringent and demanding in terms of risk mitigation and management. Insurers are now requiring businesses to demonstrate not just the presence of cybersecurity protocols, but also their effectiveness and ongoing maintenance. For example, organizations are expected to implement comprehensive security measures, including advanced threat detection, regular vulnerability assessments, and a robust incident response plan. Failure to meet these heightened standards could result in denied claims, leaving businesses exposed during a cyber event and costing them financially.
What Is Cyber Insurance?
Cyber insurance, also known as cyber liability insurance, is a specialty insurance that aims to cover the financial losses that organizations face as a result of ransomware attacks, data breaches, and other cyber incidents. Having cyber insurance can lessen the financial impact of a breach and can protect organizations with the following coverage:
- Financial loss due to business disruption
- Incident response, system repairs, forensic investigations, and other services following an attack
- Legal expenses
- Cost of notifying customers of hacks where personally identifiable information (PII) has been compromised
- Ransom payments
- Public Relations to deal with reputational management post-breach
What Are the Risks of Not Being Covered?
Without cyber insurance coverage, a company faces the full financial burden of a cyber attack, including costs associated with data breaches, ransomware payments, legal fees, regulatory fines, and the expense of restoring compromised systems. These uncovered costs can quickly pile up, particularly for small to mid-sized businesses, leading to significant financial strain or even bankruptcy. Additionally, the lack of cyber insurance can damage a company’s reputation, as clients and partners may lose trust in an organization unprepared to handle cyber threats. Without the safety net of insurance, businesses are left vulnerable to the escalating threats in today’s digital landscape, with little recourse for recovery if an attack occurs.
How Businesses Can Meet Insurance Requirements
To ensure businesses meet insurance requirements they should conduct a comprehensive audit of their current security posture. This is often led by a Chief Information Security Officer (CISO), and can be done using a cybersecurity risk assessment or other measure of Key Performance Indicators (KPIs), such as Mean Time to Detect (MTTD) and Mean Time To Acknowledge (MTTA).
Organizations should review their existing protocols against any specific criteria laid out by insurers to ensure they’re meeting minimum security requirements for coverage. Using the CIS 18 Critical Security Controls to establish a roadmap for cybersecurity hygiene can greatly help businesses bolster their security posture. A few measures businesses should ensure are in place include:
- Multi-factor Authentication (MFA)
- Incident Response Plan
- Data Encryption
- Regular Vulnerability Assessments and Penetration Testing
- Patching Management Plan
How to Attest to Meeting Insurance Requirements
Currently, there are limited ways in which businesses can prove their cybersecurity stack has been set up correctly and protects their systems from risk without facing a real attack. Insurance providers have to rely on businesses doing their due diligence and continuously testing their systems. For businesses to attest they’re able to mitigate risk, vulnerability testing and penetration testing are good options to show that risk is low. These tests can also be used to see what services are working well for your business, and which can be deprioritized or upgraded. Once an incident occurs and cyber insurers verify that your business has done what it can to effectively mitigate the breach, then you’ll be able to get the financial coverage you’ll need.
Additionally, businesses must stay informed about the evolving standards in cybersecurity insurance, as what was acceptable a year ago may no longer be accepted for coverage. Consulting with a cybersecurity expert or managed services provider for a third-party audit can provide an unbiased evaluation of potential security risks and weaknesses, and help businesses align their practices with the latest requirements, ensuring they are fully covered in the event of a cyber attack.
Outsourcing can also help businesses get a better understanding of what their security weaknesses mean in terms of business continuity and risk, and better prioritize what aspects of their IT stack they should upgrade first.
Having a tailored strategy in place and taking the time to meet insurance requirements will help ensure cyber threats are mitigated in a timely manner, and also reduce overall risk. Although meeting requirements can be a lengthy process, it is a worthwhile investment for businesses, and will ultimately strengthen their security posture.
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