Cyber insurance – what is it, and why would I need it?

Cyber Insurance provides critical financial support and expert resources to help businesses navigate the complexities of a cyber incident, making it an essential safeguard in today’s increasingly digital world.

There are a lot of misconceptions when it comes to cyber insurance, which makes it an extremely confusing and seemingly complicated area of insurance to navigate.

We often hear that cyber insurance its far too expensive or that clients still need to handle incident response themselves. We have even heard the myth that policies never actually pay out because an overly complicated form was incorrectly filled out by a support provider. All things factually incorrect meaning cyber insurance has had a rough go over the past decade.

There are of course, good policies and bad policies and very few experts in cyber risk to help clients understand their options, but while cyber incidents are on the rise, the cyber problem is not going anywhere, and neither is cyber insurance.

Every other week we hear of another business survey coming out that rates cyber incidents as the #1 concern for the survey’s respondents. Yet despite this concern, less than 20% of Australian businesses invest in a cyber insurance policy.

To a lot of business owners, it can often feel like their traditional Insurance Brokers don’t have the unique knowledge or experience to answer the cyber insurance questions being asked. And that may very well be the case. We also deal with many cyber professionals who believe budgets for technology security should be spent on technology and not on the insurance. But should investment in security be at the expense of holding insurance to protect one of the most important assets a business has in the modern age?

If your building was to suffer a significant natural disaster, most organisations can be up and running within days. Online applications and mobile computing mean the loss of an office may not always mean a business grinds to a halt. But if someone were to lock you out of your data, your email, accounting system or simply steal all your client data how long could that affect the business? It can cripple an organisation and be an ongoing headache for years.

Cyber insurance is a specialist insurance coverage, which requires a specialist skill set. Unlike general insurance policies provided by general insurance brokers (property, public liability, motor vehicles etc), cyber insurance requires an understanding of both cyber insurance as well as cyber security and cyber risk.

So, what is Cyber Insurance?

Cyber insurance, in a nutshell, gives you access to all the professional services you will need to respond to a cyber incident and the financial backing to pay for them. To some, the former is the most important part of a cyber policy.

To have the best chance to successfully respond to a cyber incident, you will need a vast array of professional services. In the beginning, you may need a cyber response to mitigate an active threat followed by a Digital Forensics team to scope out your cyber incident, or Ethical Hackers to contain the environment, but when the dust settles on the initial attack, there are some other less associated skillsets that need to get involved. From legal assistance to advise you on your next steps, to a specialised Public Relations team to communicate with clients and media, cyber incidents require many helping hands and they all cost money.

An alarming trend we see from the 80% of businesses that don’t have cyber insurance, is that they either ignore their obligations, or worse, they run out of money trying to adhere to them as the result of an incident.

Cyber incidents can cost businesses anywhere from thousands to millions. The possibilities are endless and so are the threat actors looking to take advantage of the unprepared.

Cyber insurance does not prevent a cyber incident, just like car insurance does not prevent you having a car accident. However, just like the latter, cyber insurance does provide crucial financial support in what will be an extremely stressful experience.

Businesses across Australia take out property, liability, vehicle and all other types of insurance that protect them from the threats present in their personal and business lives. But it’s now a digital world, and the ever-growing landscape of data and connectivity brings risks most have never encountered before. These risks, for 80% of businesses that don’t have cyber insurance are a significant threat.

If this article has raised questions or concerns for you, you can reach out to the author for further conversation.