May 26, 2015
Cyber insurance is designed to provide coverage from the losses incurred by an organization due to various cybercrimes such as network damage, data breaches, denial of service attacks, identity theft etc. Generally, a cyber-insurance policy protects against two types of risks – first party and third party. The former covers the losses of the policy holder whereas the latter one recompenses for the company’s liabilities towards clients, business partners and shareholders. Coverage options in a cyber-insurance policy may include crisis management, computer forensics investigation, data reconstruction, security liability, protection from cyber ransom etc.
Why Is Cyber Insurance Needed?
Every business, be it large or small, is likely to rely on information technology to some extent. In spite of using sophisticated firewalls and anti-virus software, it is nearly impossible to achieve complete security from cybercrimes. This is where the need for cyber insurance arises. It is particularly important for companies that hold confidential customer data, rely heavily on computer network to carry out business activities and deal in financial transaction processing.
Some of the reasons why companies need cyber insurance are:
- Safeguarding the data of clients is one of the most important reasons to purchase cyber insurance.
- Disclosure agreements and commercial contracts stored on the network may contain clauses regarding the confidentiality of the information. These can lead to expensive claims in the event of a breach.
- Most entrepreneurs believe that their business is sufficiently covered by other insurance policies. However, having a cyber-insurance policy will make sure that all the network security risks are comprehensively covered.
Benefits Of Cyber Insurance
- Mitigates Risk: Cyber insurance helps mitigate the risk of network attacks by increasing security measures. Insurers need to attain a certain level of cyber security in their organization as a prerequisite for coverage. This helps companies to identify the flaws in their IT system and make improvements in security practices.
- Reimburses Losses And Penalties: Cyber insurance is immensely beneficial in the event of a large scale network attack. It provides coverage for the losses incurred, costs of notifying the affected individuals, hiring an attorney, legal fees and liabilities to other people.
- Business Interruption Expenses: Some insurance policies also offer coverage for the income lost by a company as a result of the network or equipment failure due to the cyber-attack.