Cyber insurance covers businesses and individuals against cyber threats like data breaches, identity theft, and personal data theft. A cyber insurance policy is designed to cover organizations that use technology in their business operations. The idea is that if they fall victim to a cybersecurity breach where hackers steal sensitive data, the policy covers their direct losses.
While cyber insurance may sound like the end-all solution to business cybersecurity, it alone doesn’t cover businesses as they expect. When it comes to cybersecurity, having cyber insurance isn’t enough – and here are a few reasons why.
Cyber Insurance Is Complex
Deciding on the cyber insurance policy that is right for you can be a challenge. There are several different types of cyber insurance – and each policy type affords different coverage. For example, you can choose between coverage areas like data breaches, identity theft, business interruption, and extortion. You can also extend cyber insurance coverage for claims and legal action taken by customers/clients or partners, fines, recovering data, and more.
To add to the complexity of choosing between coverage for all these areas, it is a toss-up if you will end up being able to collect on a claim. Cyberattacks are constantly evolving to become more sophisticated, making it a gamble as to whether or not your cyber insurance will fully cover your direct losses.
Cyber Insurance Coverage Has Limitations
One of the challenges with cyber insurance is that the coverage is limited. In other words, it only covers what you pay for, which may or may not be relevant if you fall victim to a cybersecurity attack.
For example, most cyber insurance consists of two levels – first-party and third-party. First-party usually covers direct losses to the organization. Third-party extends to claims and legal action. Let’s say that your company suffers a data breach that exposes sensitive information for one of your clients, who decides to sue you as a result. If your policy does not include third-party coverage, your insurance will not cover this cost.
You Still Need to Maintain Your Technology
When it comes to cyber insurance, organizations often miss the fine print. Collecting on your cyber insurance policy often requires that you maintain basic protections for your IT systems. This means that while you may have allocated a budget towards cyber insurance, you also need to dedicate funds to mainlining your technology. If you do not follow the guidelines in your policy, you will not be able to count on your insurance provider to pay out in the event of a claim.
Rather than worrying about the pitfalls that come with relying solely on cyber insurance, you should consider managed security services. These services can help fill any cyber insurance gaps because they allow you to proactively maintain your systems to avoid problems. They also give you access to cybersecurity experts that can troubleshoot and resolve issues quickly to minimize any negative financial impacts.