Complying with Cyber Liability Insurance Requirements
More businesses are facing growing cybersecurity threats. Data shows that in 2022, cyberattacks were the biggest concerns for companies, exceeding natural disasters and business and supply chain disruptions.
That’s because the cost of a cyberattack can be expensive and financially damaging for most organizations. Research shows that 83% of small businesses are not financially prepared to deal with the damages of a cyberattack.
Cybersecurity liability insurance seeks to change that narrative by making the financial landing softer for businesses that have suffered a cyberattack.
However, it comes at a compliance cost which typically involves the implementation of multi-factor authentication, data backups, vulnerability management, and cybersecurity awareness training for employees.
Here’s what you should know about cybersecurity liability insurance and its compliance requirements.
What is Cyber Insurance Coverage?
Cyber liability insurance or cyber insurance protects companies from liabilities and damages arising from hacks, data breaches, or malware attacks. It’s a relatively new coverage from the insurance industry, sparked by increasing cybersecurity threats against organizations.
Recent research shows that hackers can penetrate 93% of corporate networks.
Cybersecurity insurance helps cover legal fees and expenses, customer notification, data recovery, and repair of affected computer networks and systems.
Who Needs Cyber Security Insurance?
With most businesses migrating to the cloud and relying on technology significantly, almost all businesses need a cyber liability insurance cover. Speaking to a business insurance agent will often help you assess your business’s risks and determine what amount of coverage will be appropriate for you.
Typically, cybersecurity insurance is more important to the following businesses:
Businesses Storing Important Data on Their Computer Network or Online
If your business stores important data such as credit card numbers, phone numbers, or social security numbers online or on its computer network, you’re at a high risk of a cyberattack. Therefore, you should consider a cybersecurity insurance policy.
Businesses with Valuable Digital Assets and High Revenue
The true cost of a cyberattack can be difficult to predict. However, larger companies with more valuable digital assets and high revenue often take the biggest financial hit after a data breach. Therefore, they should purchase more comprehensive cybersecurity insurance coverage.
Businesses with Large Customer Bases
Businesses with large customer bases store large amounts of customer data. They’re often subject to hefty fines from regulators if a cyberattack compromises such data.
Most state laws also mandate that businesses inform affected clients of a data breach immediately after it’s detected and verified to be true. First-party cyber liability policies cover these costs, which often get heftier with larger customer bases.
What Does Cyber Insurance Cover?
Since it’s a relatively new policy, there are no defined standards for what a cybersecurity insurance policy should and shouldn’t cover. However, most policies typically cover costs directly associated with a security breach.
This includes data recovery, hardware repairs, attack documentation and investigation, customer notifications, crisis management, regulatory compliance, and PR damage control.
Depending on your provider, a cyber insurance policy may offer additional coverage in the form of first-party and third-party cover. These coverages include legal costs, fines, lost income, and settlements resulting from a data breach.
The amount of coverage you choose will depend on your line of business, whether you process and store sensitive company and customer information, and the strength of your cybersecurity measures.
What is Not Covered by Cyber Liability Insurance
Cyber liability insurance is not a panacea for all data security concerns within a business. Therefore, gaps within the coverage often must be remediated using alternative means.
Typically, most policies will have the following exclusions:
- Future income: Most covers will not shield your business from profit loss from reputational damage due to data breaches or operational negligence.
- Data security improvements – Most cybersecurity insurance covers will not cater for expenses incurred in preventing future cyberattacks.
- Outside agencies – Most policies will not cover damages resulting from acts of war.
- Devaluation – If a data breach results in the loss of valuable information or intellectual property, cybersecurity insurance will not cover any losses in company value.
Typical Requirements of Cyber Liability Insurance
Most insurers provide a list of requirements you must comply with to maintain your cyber liability insurance coverage and be eligible for claims. Here’re a few essential ones you must consider.
Multi-Factor Authentication (MFA)
Multi-factor authentication requires users to provide several identification factors to access the corporate network, account, or system. MFA adds a security layer over traditional single-password authentication.
Therefore, many insurers require businesses to implement MFA to reduce the risk of a data breach.
Ransomware is a rising and costly cybersecurity threat. Data shows there were about 236.1 million ransomware attacks in the first half of 2022.
Most businesses and insurers are responding by requiring and implementing robust data backup strategies, especially for vital corporate data. Some of the data backup recommendations provided by insurers include:
- All backups should be encrypted
- Administrators should logically separate the data backups from the network
- There must be incremental data backup intervals based on changes to the data with periodic full backups
- Data backups should be stored on more resilient media, such as optical, magnetic, or tape, for maximum safety
- The IT team should have a schedule for data restoration testing to ensure the backups are working correctly
Cybersecurity Awareness Training and Testing
Most insurers require that businesses offer periodic and updated security awareness training and testing to all staff and employees to qualify for cyber liability insurance. This training helps businesses reduce the threat of becoming victims of a cyberattack.
Research shows that employees are one of the most vulnerable cyberattack entry points.
Vulnerability management is the classification, detection, repair, and mitigation of cybersecurity exposures. It’s a continuous process that your business must participate in to improve its overall cybersecurity posture and be eligible for cyber liability insurance and claims from most insurers.
Vulnerability management helps your organization identify network vulnerabilities within the corporate network and patch them before a hacker exploits them and confiscates the network.
Privileged Access Management
Most insurers require that access to privileged permission or administrator accounts be secured by more stringent credentials that differ from general users.
Therefore, permission and authorization of such accounts within the network should be siloed, allowing only authorized individuals to perform privileged actions.
Get a Security Partner Who’ll Always Ensure You’re Compliant
Cybersecurity insurance is an important cover for your business. It will ensure that your financial losses from a cyberattack are minimal. Partner with us today and let us help improve your organization’s cyber security and remain compliant to state laws and the requirements of insurers.