Whether your organization is large or small, you’re either preparing for a breach event, or recovering from one. As cyber threats continue to evolve and become more sophisticated, the demand for cyber insurance has steadily increased.
High-profile cyber attacks and data breaches have highlighted the potential financial and reputational risks that companies face. As data protection and privacy regulations (such as GDPR, CCPA, and others) become more stringent, companies are turning to cyber insurance as a way to manage potential regulatory fines and legal costs.
Cyber insurance policies are becoming more comprehensive, covering a wider range of cyber risks beyond just data breaches. This can include coverage for business interruption due to cyber incidents, ransomware attacks, and regulatory fines. Some cyber insurance policies now include access to incident response services, such as forensic investigations, legal counsel, and public relations support to manage the aftermath of a cyber incident.
The cost of cyber insurance premiums vary significantly based on factors like your company's industry, size, cybersecurity posture, and coverage limits, but premiums have been on the rise due to the increasing frequency and severity of cyber attacks.
What you need to know about cyber insurance
Cyber insurance is generally not mandatory for companies, but there are certain situations and drivers that prompt companies to consider obtaining a cyber insurance policy, including ransomware protection, regulatory compliance, and business continuity.
Insurance companies are placing greater emphasis on risk assessments and underwriting processes, so companies will likely need to demonstrate their cybersecurity measures and practices in order to obtain coverage.
The process of obtaining or renewing a cyber insurance policy involves several steps to assess a company's cybersecurity posture and determine the coverage and premium rates.
Here's an overview of the typical process and the requirements that insurance companies might ask for in terms of demonstrating security controls:
1. Application
The first step is to fill out an application form provided by the insurance company. This form will gather information about your company's operations, IT infrastructure, security measures, and any previous cyber incidents.
2. Risk Assessment:
Insurance companies will conduct a risk assessment based on the information provided in the application. They will evaluate the company's industry, size, data handling practices, security controls, and historical cyber incidents. This assessment helps the insurer understand the level of risk associated with insuring your company.
3. Security Controls Assessment:
Insurance companies will often require companies to demonstrate their cybersecurity measures and controls. This might include providing documentation and evidence of the following:
- Security Policies and Procedures: A company needs to show that it has established cybersecurity policies and procedures that are regularly updated and communicated to employees.
- Network Security: Insurance companies may ask for details about firewalls, intrusion detection systems, encryption protocols, and other network security measures in place.
- Data Protection Measures: Companies should demonstrate how they protect sensitive data, such as customer information and proprietary data, through encryption, access controls, and secure storage. Automated data discovery and classification can streamline this process.
- Incident Response Plan: Insurers want to know that a company has a well-defined plan in place to respond to and mitigate cyber incidents. This includes steps for containment, investigation, communication, and recovery.
- Employee Training: Companies may need to show that they regularly train employees about cybersecurity risks and best practices to prevent social engineering attacks and human errors.
- Vendor Management: Insurance companies might inquire about how third-party vendors and partners are assessed for their own cybersecurity practices, as they can introduce risks to your environment.
- Patch Management: Demonstrating a systematic process for keeping software and systems up to date with security patches is important to insurers.
- Penetration Testing and Vulnerability Assessments: Some insurers may require evidence of regular penetration testing and vulnerability assessments to identify and address potential weaknesses.
- Multi-Factor Authentication (MFA): Implementing MFA for critical systems can improve your cybersecurity posture, and insurance companies may want to know if it's in place.
4. Underwriting:
Based on the risk assessment and the information provided by the company, the insurance company's underwriters will determine the coverage limits, deductibles, and premium rates for the cyber insurance policy.
5. Policy Issuance:
If both parties agree on the terms, the insurance company will issue the cyber insurance policy, outlining the coverage, limits, exclusions, and any conditions that need to be met.
6. Ongoing Monitoring and Reporting:
Some insurance policies may require ongoing monitoring of cybersecurity practices and regular reporting of any security incidents or changes to the IT environment.
Understanding your organization’s security posture and security maturity
It's important to note that the decision to obtain cyber insurance should be based on a thorough assessment of your company's specific risk profile, cybersecurity measures, and potential financial exposure.
Your organization should work closely with insurance professionals to tailor policies that align with the business’s unique needs and risk tolerance. Additionally, the landscape of cybersecurity and cyber insurance is dynamic, so it's important to stay up to date with the latest trends and regulatory changes.
Understanding where your organization ranks in terms of its security maturity can simplify cyber insurance issuance processes. Cybersecurity maturity is established by the comprehensive, secure processes and procedures that are applied to protect sensitive data and business systems from external threats.
To achieve higher levels of security maturity, businesses should focus on risk management, external attack surface assessments, and cyber asset attack surface management. Creating user access control policies, regular patch application updates, and domain and vulnerability scanning are other key tactics.
A one-size-fits all approach to data protection—and cyber insurance issuance—won’t work, because all businesses are unique in terms of their industry, size, regulatory requirements, and baseline security maturity. Download the Data Protection Solutions Guide for tips that can help your team organize and prioritize data security best practices that support security maturity planning and cyber insurance processes.
