What is Cyber Insurance, how it works and why you may need it
What is Cyber Insurance?
Cyber Insurance policies help cover the financial losses that result from cyber events and incidents. In addition, cyber-risk cover helps with the costs associated with remediation, including payment for the legal assistance, investigators, crisis communicators, and customer credits or refunds.
Find out more about the most common types of cyber-attacks and what you can do to prevent them by clicking here.
As cybercrime becomes an increasingly pressing issue in Australia, it is essential to raise awareness and take preventative measures. The Annual Cyber Threat Report for 2021-2022 reveals that the Australian Cyber Security Centre has received a worrying 76,000 reports of cybercrime, which represents a 13% surge from the previous fiscal year.
With monetary and data threats and the risk of reputational damage and increasing loss of consumer trust, it is important to secure your organisation in the event of cyber-attack.
With cyber-attacks increasing in number and severity, organisations are realising the need to protect their financial security with cyber insurance. Not only are businesses securing insurance for themselves, but they are also requiring the third parties they work with to have coverage.
For many though, there is still a need to understand what Cyber Insurance does, how it works and to what benefit?
How does Cyber Insurance work?
A Cyber Insurance policy can cover for liability arising from unauthorised use of, or access to your networks electronic data or software. It also covers liability claims for inadvertently spreading a virus or malicious code, computer theft, extortion, or an unintentional act, mistake, error, or omission made by your employees while performing their job.
Claims covered under a Cyber policy are typically quite broad, but are usually focused on three core areas of cover:
- Liability (privacy lawsuits and regulatory defence)
- Internal Financial Loss (extortion, notification expenses, data recovery, business interruption, crime/theft)
- Emergency Incident Response (costs incurred from responding to a Cyber Event).
Why you need Cyber Insurance
Data is one of the most important assets (and is also among the most vulnerable), yet it is generally not covered by standard property insurance policies.
Many Australian businesses are unprepared for dealing with a cyber incident and this is especially true for small to medium sized enterprises (SMEs). Almost half the SME respondents in a recent survey by Chubb were unaware of their obligations under the Notifiable Data Breaches Scheme. Only 40% thought that their revenue or sales would suffer and only 27% had Cyber Insurance.
Globally, cyber threats are rated as the number one risk businesses face, according to the 2020 World Economic Forum Global Risk Report. Taking into account that cyber-threats are becoming increasing sophisticated, prevalent and, in the case of ransomware demands, significantly more costly. Quantifying the cost of a cyber-attack is difficult, but estimates range from between $200,000 to over $600,000 per incident (which are expensive enough to cripple many SME’s).
However, these estimates don’t account for other indirect costs of a cyber-risk which include (but are not limited too):
- Damage to your companies’ brand and reputation
- Costs to company value and/or share value
- Business interruption
When taking these types of indirect costs into account, the total cost of a cyber-attack could be astronomical.
Suffering a cyber-attack can seriously compromise your financial viability; a cyber insurance policy that covers your risk exposures and, at the very least, includes cover for things like business interruption, loss of data, legal expenses and data recovery, can be valuable.
For further resources about cyber security, head to our our “Cyber Insurance” page or choose from any of the resources listed below:
If you would like to speak with one of our Account Managers about Cyber Insurance for your business, please contact us on 1300 755 112 or complete our quote form and we will get back to you.