In the past, cyber insurance was a polarizing issue in my discussions with privacy and risk professionals. Some professionals were adamant about the benefits of cyber insurance, while others worried that the policies currently on the market didn’t meet its needs or were too costly. However, I believe the industry is maturing and the coverage options today are much better than just a few years ago.
The fact is cyber insurance is playing an increasing role in companies’ preparedness and response efforts. A 2013 study revealed that:
- 31 percent of companies already have cyber insurance
- 44 percent are extremely likely to recommend colleagues get a policy
- 39 percent currently do not have a policy but plan to purchase one
Another part of the story lies in what’s to come: Annual cyber insurance policy premiums totaled $1.3 billion in 2012 and significant increases are expected. Yet, many organizations still have misconceptions about the policies, and understandably so. After all, a decade ago businesses weren’t pondering the need for cyber insurance.
Here are three common myths surrounding cyber insurance and a deeper look into the reality of each:
- Myth One: My risk is too low to justify the costs.
Reality: Policies today are more flexible and more scalable than in years past. There is no one-size-fits-all policy, and that’s good news because no company can completely sidestep the risk of a data breach, not even small businesses. In fact, it’s in the small business arena that cyber insurance is taking on more urgency. There’s a dichotomy in small businesses thinking they are off hackers’ radars due to their size and attacks on small businesses increasing threefold from 2011 to 2012.Fact: Considering no company is immune to a breach, thinking you have too little risk for cyber insurance is dangerous thinking. When your company stores data, whether patient, customer or even employee data, the risk is there. Whether or not cyber insurance is there too is your call.
- Myth Two: My IT department has it under control.
Reality: A strong security posture is the top way to reduce breach costs, so the role of IT in breach prevention can’t be stressed strongly enough. However, the simple truth is that technology just is not enough. Technology doesn’t always protect you from accidental data leaks on an employee’s part. It doesn’t always protect you when employees use their own personal mobile devices to access – and potentially expose – private company data either. Yes, technology goes a long way in securing data and preventing breaches. No, it doesn’t cover every base, every time.Fact: Purchasing cyber insurance has nothing to do with whether your IT department is or isn’t up to snuff. It’s to help protect you and offer you support when you’re up to your ears in data loss.
- Myth Three: Cyber insurance is only for the big guys.
Reality: Sure, it’s the big breaches at the big companies that grab the headlines and media attention. But 72 percent of breaches happen at small businesses. With data loss occurring across all sizes of companies and across all industries, don’t let the absence of media coverage about small incidents fool you. They’re happening. Losing customers and facing lawsuits and fines is always bad for business, so a data breach can be detrimental to any company, no matter the size.Fact: Cyber insurance is not only for mega conglomerates and mega breaches. With a policy matched to a company’s size and risk, cyber insurance helps to cover costs related to legal defense, notification, forensics and more.
Yes, some companies are still skeptical about cyber insurance, just like some companies still don’t have a data breach response plan. But that doesn’t mean you should leave yourself vulnerable. Take a realistic look at your risks, explore cyber insurance and create a breach response plan.
The more ways you have to reduce your risks of reputation damage and financial loss during a breach, the better off you’ll be. So know the facts and be prepared for the sake of both your business and your customers.
Also, to learn what others in the business community think about cyber insurance, check out the Ponemon Institute’s “Managing Cyber Security as a Business Risk: Cyber Insurance in the Digital Age”.