Cyber insurance – the pros and cons

You have plans for uninterrupted efficiency and success. But sometimes the world has other plans. How do you protect against losses should there be a temporary shutdown of your business?

Many businesses rely on the use of information and communications technology (ICT) systems to carry out their day-to-day activities. With an increase in the use of these systems, criminals and other malicious persons are quick to discover and exploit any associated vulnerabilities.

Cyberattacks have become the new normal, resulting in companies looking for ways to protect their businesses from emerging risks. Everyone is a potential target for hackers, from large corporations to small businesses.

A cyber insurance policy covers the liability and costs incurred in the handling of a cyberattack or breach, malware infection, business email compromise, cyber extortion demand, and ransomware, among others. While certain cyber exposure may be covered under a Business Interruption1 or Professional Indemnity policy, these policies are very limited in their coverage and, therefore, companies are still faced with a number of risks related to data breaches.

The questions now present themselves: what exactly is covered, and, more important, what are its main pros and cons?

Examples of coverage available

1. Network security

Cyber insurance provides coverage against network security breaches. Information and privacy risks abound, so you need to keep your bases covered against network security failure. This includes malware infection, business email compromise, cyber extortion demand, and ransomware.

2. Network business interruption

Modern businesses tend to rely on advanced technology to remain operational. In the event of an incident, some form of interruption is imminent. A cyber insurance policy could potentially cover income losses, interruption expenses and special expenses as a result of a total or partial interruption, degradation in service or failure of the computer systems.

3. Privacy liability

When a breach happens, it can expose the sensitive data of your customers that lies on your servers. As a result, your business could be held liable. Cyber liability insurance will therefore provide coverage for payment on your behalf which you are obligated to pay as damages and claims expenses from your acts, errors or omissions following a privacy or security breach.

The benefits of buying cyber insurance

• Greater executive awareness. Recognising the scope of cyber risks and the severity of their consequences could pave the way for much-needed security initiatives.

• Cyber insurance helps companies to offset the costs associated with cyber breaches

• Cyber Insurance providers may also provide crisis management and risk-mitigation strategies to reduce the probability of a cyber loss.

Source: https://www.finance-monthly.com/2020/03/the-pros-and-cons-of-cyber-insur...