What is Cyber Insurance?
Cyber insurance, also known as cyber liability insurance, safeguards businesses and individuals against the financial consequences of cybersecurity incidents. By providing financial protection and encouraging stronger cybersecurity practices, cyber insurance plays a crucial role in mitigating the growing threat of cybercrime and fosters a more responsible cybersecurity environment. Unlike traditional insurance, cyber insurance specifically addresses modern digital risks, offering protection against data breaches, extortion, hacking, denial-of-service attacks, and online defamation. It also provides additional benefits such as security audits, public relations support, and investigation expenses.
The increased risk of cyber-attacks during the pandemic prompted many organizations to turn to cybersecurity insurance to manage financial and liability risks. As a result, the cyber insurance market has grown and evolved.
Common Cyber Insurance Requirements
Since many cyber insurance providers didn’t understand the risks and lost money on the policies in place during the pandemic, they are now more careful and have higher security requirements. The most common of these are explained below:
1. Strong Access Controls
Insurers can require businesses to enforce strong access controls to minimize the risk of unauthorized access to sensitive data and systems. These controls use authentication and authorization rules to regulate user access. Access control methodologies vary in complexity, with the three most common ones being: discretionary access control, role-based access control, and attribute-based access control.
- Discretionary Access Control (DAC): Allows the owner of a resource to specify who can access that resource. Each user is assigned a set of permissions that determine what actions they can perform on each resource. DAC is simple and easy to implement, but not generally suitable for large-scale systems with many users and resources.
- Role-Based Access Control (RBAC): Assigns users to roles, and then grants permissions to roles. A user’s access to a resource is determined by the roles that the user is assigned. RBAC is more flexible than DAC, as it allows permissions to be assigned to groups of users rather than individual users. However, it still requires manual management of user-role assignments.
- Attribute-Based Access Control (ABAC): Uses attributes to determine access. Attributes can be anything, such as the user’s job title, the resource’s classification level, or the time of day. ABAC is more fine-grained than DAC and RBAC, as it allows access decisions to be made based on a wide range of factors. However, it is more complex to implement and manage than DAC and RBAC.
2. Vulnerability Management and Assessments
Vulnerability management is the process of finding, classifying, and fixing weaknesses in your network and software. It’s an ongoing process that’s part of your overall security strategy. Vulnerability scans help identify flaws before attackers exploit them. This also includes conducting regular external scans to find weaknesses cybercriminals could use to get in. Many cyber insurers require companies to have a working vulnerability management plan to qualify for coverage. Insurers may also mandate businesses to conduct regular vulnerability assessments to spot weaknesses and take corrective action to protect data security. Authentication vulnerabilities are a major cause of data breaches, often caused by poor credentials or coding errors.
3. Incident Response Plan
Businesses are often required to have a tried and tested incident response plan (IRP) in place to respond to cyberattacks quickly and effectively. This plan will help to contain incidents as they happen and limit damage. Your IRP should include:
- Who to notify and how during an incident.
- What information to collect during the incident.
- A way of classifying each incident.
- Protocols for conducting a forensic analysis after an incident is resolved.
4. Security Awareness Training
Insurers frequently demand that businesses conduct regular cybersecurity training to guarantee that employees understand their role in safeguarding data and systems. Effective cybersecurity training should include topics like identifying phishing emails, creating strong passwords, using multi-factor authentication, practicing safe browsing habits, reporting suspicious activities, and staying updated on emerging cyber threats. To meet cyber insurance requirements, businesses may have to conduct mock phishing campaigns.
5. Multi-factor Authentication
To minimize unauthorized access, insurers may require corporations to use Multi-Factor Authentication (MFA) for remote access to their systems, given the rise in remote work and cloud computing, which have expanded the threat landscape. MFA offers layered protection by requiring two forms of verification: a password and a physical token or biometric marker, making it harder for hackers to gain access.
6. Encryption
Cyber insurers are increasingly requiring companies to encrypt sensitive data as a condition of coverage. This is because encryption is one of the most effective ways to protect data from unauthorized access as it scrambles data so that it can only be decrypted with a key. This makes it much more difficult for attackers to steal or misuse data, even if they are able to access it.
7. Separate Backups
Solely relying on a single data backup is insufficient for comprehensive cyberattack protection. To ensure complete security, maintain separate backups independent of your primary environment. This segregation guarantees that one compromised backup does not jeopardize the integrity of the others. Additionally, storing backups in diverse locations provides further security, ensuring data accessibility even if one site encounters an attack. The practice of creating separate backups is often necessary for cyber insurance eligibility.
8.Endpoint Detection and Response
Endpoint Detection & Response (EDR) solutions are increasingly required by cyber insurers as a way to mitigate cyber risks and protect sensitive data. EDR solutions provide real-time visibility into endpoint activity. They can prevent or minimize the impact of cyberattacks, such as malware infections, phishing attempts, and ransomware attacks. Additionally, EDR solutions can help businesses comply with regulatory requirements and industry standards, which can lead to lower insurance premiums.
What Does a Cyber Insurance Policy Cover?
A cyber insurance policy covers various losses, including data recovery costs, revenue loss due to business interruptions, and stolen funds from cyberattacks like phishing and ransomware. It also covers the expenses associated with data breach aftermath, such as victim notification, credit monitoring, and forensics. Below are some of the most common areas that cyber insurance policies cover:
Guidance for preventing security incidents
Cyber insurance goes beyond just financial protection, offering proactive tools to manage and mitigate cyber risks. By leveraging their expertise, insurers can provide valuable services like vulnerability assessments, cybersecurity training for your staff, and access to threat intelligence, ultimately helping you strengthen your defenses and avoid cyber incidents altogether.
Costs associated with breaches and privacy violations
Cyber insurance policies typically include a crucial section covering costs associated with security breaches, providing vital protection for businesses. This coverage extends to various expenses, including customer notification, call center services, public relations, IT forensics, legal fees, and regulatory compliance costs. Additionally, it offers protection against privacy infringement claims and associated legal expenses, safeguarding businesses that handle sensitive customer data. This type of insurance ensures both financial compensation for legitimate claimants and legal defense against privacy breaches, offering vital support for organizations managing personal information.
Damage to digital assets
This insurance shields your business from the devastating consequences of digital asset damage, safeguarding your website, photos, and vital data from loss, corruption, or malicious alteration. It also protects against the misuse of computer systems, vital for businesses reliant on online operations or automated manufacturing, where even minor incidents can cripple operations and incur significant costs.
Cyber extortion
Cyber extortion insurance safeguards your business against ransomware attacks, where hackers hold your data hostage and demand payment for its release. This coverage typically reimburses ransom payments and consultant fees for negotiating with attackers. While paying a ransom shouldn’t be the first resort, reporting the attack to authorities and consulting your insurer is crucial before making any decisions. After resolving the attack, prioritize repairing the breach and enhancing your security measures to prevent future incidents.
Support for forensic investigations
Cybersecurity incidents can be devastating, but many insurance policies include post-incident support as standard, offering immediate access to recommended cyber specialists. These experts provide 24/7 assistance, diagnosing the breach’s source, proposing preventative measures, and advising on legal, regulatory, and customer notification requirements, ensuring your business is guided through the recovery process and equipped to avoid future attacks.
Interruption of business operations
This is an important aspect of most cyber insurance policies. If an IT failure or cyber-attack interrupts your business operations, insurers will cover your loss of income during the period of interruption, including if this is caused by increased costs of conducting business in the aftermath of the incident. This can be a critical safety net as you look to recover your normal working pattern.
Liability costs
Cyber insurance acts as a safety net for businesses operating online, protecting them from legal claims arising from their digital presence. It covers potential liabilities like libel, slander, defamation, and intellectual property infringement, proving especially crucial for companies heavily reliant on digital data transmission, social media, content creation, or online advertising, where the risk of such claims is heightened.
Digital-to-physical risks
The lines between cyber and physical security are increasingly blurred as businesses become more reliant on digital infrastructure. Cyberattacks can now directly impact physical assets, such as medical devices or industrial machinery, causing bodily injury, property damage, or operational disruptions. While traditional liability insurance may not cover these digital-to-physical risks, cyber insurance policies with Bodily Injury and Property coverage can provide crucial protection, safeguarding businesses from the consequences of cyberattacks that manifest in the physical world.
How Lepide Can Help Reduce Cyber Insurance Premiums
By providing real-time monitoring and analysis of user behavior, the Lepide Data Security Platform enables companies to detect and prevent unauthorized access, data breaches, and other security threats promptly. This proactive approach to cybersecurity demonstrates to insurance providers that your company is taking stringent measures to safeguard its data and assets. For example, Lepide’s solution is able to generate detailed reports at the click of a button, which can be sent to the relevant insurers as evidence of their commitment to cybersecurity.
If you’d like to see how the Lepide Data Security Platform can help you meet cyber insurance requirements, schedule a demo with one of our engineers.