Here is what you need to know about cyber insurance not only if you are considering a plan in 2021, but even to be able to secure an effective policy at any point in the near future. The growth rate of data breaches established in previous years only escalated during the COVID-19 pandemic, and 2020 is expected to have a significant impact on future policies. Insurers offering coverage plans for cyber incidents must adapt to these lessons, and reinforce clients’ obligation to meet a cybersecurity standard to preserve policy value.
Here are a few things you need to know about considering cyber insurance for 2021:
Traditional Insurance Offers Little Respite for Cybersecurity
Cyber liability coverage emerged because traditional insurance policies address little, if any, of the damages resulting from a network disruption. This reflects the harsh game of catch up many industries have had to play in pivoting to the age of digital transformation and widespread Internet connectivity, but the impact here is felt on the customer side most. This means the only economic respite for your business after an incident will typically be with a specific type of coverage policy offered by a select number of providers.
Cyber Insurance Requires Risk Assessment and Management
Cyber insurance policies, like all coverage plans, are developed based on the risk a client will statistically face and that the insurer will take on financially. Cyber risk in particular, of course, has risen steadily year after year and virtually exploded in 2020 with the mass shift to work from home environments along with the growth of phishing scams. Providers will have to further reevaluate liability for potential customers in 2021 and are guaranteed to demand greater cybersecurity enforcement on latter’s end.
Ransomware is Driving Up Premium Rates
The cyber incidents of the previous year have already impacted the direction of the insurance market, with the ransomware surge prompting some insurers to drive premium costs up. This is due in large part, if not solely, to the fact that some payments can be and are used to meet ransom demands and unlock critical files, increasing liability significantly. The means that cyber risk assessment will include your susceptibility to data breach, this type of malware, and what you have done to prevent both, raising your price accordingly.
Remote Workers Can Create Coverage Exclusions
Having employees working from home can not only increase your cyber liability, but incidents that originate with remote workers can trigger coverage exclusions in some cases. Underwriters are still catching up the changes the pandemic introduced, and the mass distributed workforce led to quite a few gray areas in cyber insurance. Since policy language typically focuses on employer liability tied to property, employees in their home workspace using personal devices and suffering a network incident can constitute a loophole if you are not careful.
Data Privacy Compliance May Affect Your Cyber Insurance
Noncompliance with data privacy regulations will come in the form of fines and penalties, and thankfully many cyber insurance plans do cover these costs. Unfortunately, this is not universal for every provider nor for every regional law, from the EU’s GDPR to California’s CCPA or the NY Shield Act. This requires more scrutiny on your part in reading through policy language, including ensuring that the expenses of identifying source and extent of breach will be insured as well.
Insurance Still Adjusting to Small Business Cyber Risk
Regulators and market experts have been pushing the cyber insurance sector to help enforce better cybersecurity, and a few have gone as far as to say that existing policy standards have failed the industry and their clients. Insurers have mirrored the mistakes of the public at large regarding data protections, with coverage language focusing primarily on enterprise concerns. With the particular vulnerability of small business undeniable at this point, the greatest changes in this area will most likely be extending the range of plan options, providing more value to a SMB commensurate to the cyber risk they
Learn How to Meet the New Standards of Cyber Resilience
Cyber insurance is not and will not be a replacement for an effective cybersecurity strategy, but it is a backup for managing the costs of the inevitable attempt hackers will make at breaching your systems. The requirements for finding the best coverage for you should already be part of your security approach – improving your cyber resilience to protect your network, which should also help manage your monthly premiums once you are insured.
Download our free ebook here to learn more about the importance of cyber resilience and what you need to do to secure your data.