With the increasing prevalence and sophistication of cyberattacks, cybersecurity insurance is critical to almost every business in today’s environment. Although companies that store or transmit confidential information or financial transactions are particularly at risk, ransomware has impacted nearly every industry. Data shows that global cyberattacks increased by 38% in 2022 compared to 2021. The shift to work-from-home opened new avenues for exploitation, and now the rise of artificial intelligence technology is expected to accelerate cyberattacks in 2023 and beyond.
Cyberattacks are costly
Many companies have learned the hard way what a financial toll cyberattacks can take. To combat this, security and data privacy regulations are becoming stricter, with tough penalties to match. Business interruptions resulting from cybersecurity attacks can be especially devastating to small businesses. Fortunately, companies can take additional steps to protect against financial losses caused by incidents such as data breaches and ransomware exploitation by obtaining cyber insurance. Even organizations with strong programs to minimize the risks and impacts of data breaches, system interruptions, ransomware attacks and other cyber threats should consider cyber insurance to transfer the remaining risk.
Requirements for cyber insurance
It is important to note that obtaining cyber insurance is not guaranteed; companies must have reasonable security programs in place, or insurance companies will decline to offer coverage. Some companies seeking to purchase or renew a cyber policy are surprised to receive a lengthy security questionnaire from the insurer and can’t answer the questions affirmatively.
Prior to your cyber insurance application, there are several basic controls organizations should have in place:
- Establish a comprehensive cybersecurity program, including policies and procedures for preventing, detecting and responding to cyber incidents.
- Implement a vulnerability management program to identify and remediate weaknesses in your systems.
- Install endpoint detection and response (EDR) systems on all servers and workstations.
- Train employees in cybersecurity awareness and test them against realistic cyberattack scenarios, such as phishing emails.
- Use strong authentication for all key systems, especially multifactor authentication (MFA), whenever possible.
- Develop a disaster recovery and business continuity plan, including secured data backups, that will ensure you can recover effectively from an incident.
- Conduct security audits and/or penetration tests on your systems.
These items form the foundation of any functioning cybersecurity program. Without them, an insurance company may not just raise premiums; they are likely to deny coverage entirely.
Cyber insurance is an important consideration for companies in today’s digital landscape. However, you must take steps to ensure proper cybersecurity hygiene before you can qualify for insurance coverage.