As new-age threats dominate the business landscape, an increasing number of organizations have come to identify cyber insurance as a key component of their risk management plan. Organizations understand that cybersecurity threats can cause a great deal of financial damage.
A PWC report stated that for a small organization, the average financial loss due to a security incident was approximately USD 1 million, while for medium and large organizations, it could go up to approximately USD 6 million.
COVID-19 has led to an uptick in cyber insurance
Considering the financial losses, cyber insurance can mitigate the risks caused by crippling cyberattacks — this year, in particular, has seen an upsurge in organizations opting for cyber insurance due to the effect of the COVID-19 pandemic.
The increasing number of attacks especially on healthcare services has resulted in organizations actively exploring cyber insurance. A report suggested that the cyber insurance market would grow at a 26% Compound Annual Growth Rate (CAGR) and increase to USD 70,671.9 million by 2030.
Broadly speaking, cyber insurance is also referred to as cyber risk insurance or cyber liability insurance coverage (CLIC). It is a speciality type of insurance and like other forms of insurance, is aimed to protect organizations from risks related to cyberattacks, breaches and other forms of damage that can be caused by malware. While cyber insurance is customized according to each customer or plan, some plans do offer coverage for damage to physical infrastructure as well.
A niche field that is still evolving
However, for enterprises that are considering taking some form of cyber insurance, it is important to understand that it remains a niche field and continues to evolve. As risk assessment is not easy to evaluate, premiums remain high due to the uncertainty of pegging losses.
Restrictive conditions that may be difficult to meet are also imposed by insurers on enterprises such as deploying the highest levels of encryption and complete security patches. There is still a limited number of insurers offering these packages which increases the premiums imposed.
Not a replacement for enterprise security solutions
Before adopting insurance, enterprises should conduct thorough risk assessments and understand the nature of the cyber insurance plan they are opting for. Cyber liabilities have different aspects that distinguish it from other common forms of insurance – there may be breaches that remain undetected and only come to light after months or years. It is important to assess the most integral portion of the organization which may require insurance and then work towards finding a plan that provides both peace-of-mind and protection.
At the same time, it is important not to consider cybersecurity as a replacement for cyber insurance. The two are not interchangeable. At best, cyber insurance offers a level of mitigation for a cyberattack. A definite and thorough cybersecurity plan offers an enterprise the best protection against all manners of cyber threats. In fact, before approving any sort of cyber insurance plan, the insurer will most certainly want to see a strong cybersecurity apparatus before approving a scheme. That is why both cybersecurity and cyber insurance should be part of an enterprise’s overall cyber risk management plan.
Seqrite, Quick Heal’s Enterprise Security brand, enables enterprises to deploy a comprehensive set of enterprise security solutions to proactively safeguard all IT assets of the business.