Enterprises today rely heavily on technology to perform business processes. In many ways, technology has been a driving force for much of the developments in recent decades. Aside from revolutionising business processes, technology has been pivotal in the evolution of the required skill set for employees. Hiscox has identified jobs that have become obsolete as a result of technological innovation and the rise of new occupations stemming from innovations like the internet. While technology is beneficial for the most part, there are emerging risks involved that business insurance can help mitigate.
With companies relying on the internet, cybercrime is considered to be a common threat and an emerging risk resulting from technology. In 2017, 68% of large organisations suffered a cyber-security breach, while 52% of small businesses suffered the same. Furthermore, 53% of these data breaches were malicious. Unfortunately, only 29% of companies have written cyber-security policies. Not having cyber-insurance policies leaves the majority of businesses vulnerable to the risks of cybercrime.
Building resilience through cyber insurance
The crucial role of cyber insurance is providing support and protection for businesses when they experience a malicious hacker attack or data breach. A data breach can occur from within an organisation. In fact, according to research, 59% of employees who quit or get fired steal proprietary data from the company. The right cyber insurance coverage should be comprehensive, simple, and act as a trusted partner when the company is subject to a claim.
Choosing the level of cyber insurance coverage
Cyber insurance policies offered by various firms continue to change to provide for the different needs of businesses. Below are the most common coverage categories which may still vary depending on the provider:
- First-party loss or damage. This coverage protects a company when a cyber-attack damages property. First-party loss or damage may include recovering the cost of deleted and corrupted software, incident investigation costs, and recouping the loss of intellectual property value.
- Increased costs and business interruption. This coverage aims to assist companies with profit loss and added expenses incurred either through cyber-attacks or when IT systems fail. It also covers revenue loss caused by a data breach resulting in decreased customers, loss of clients, and loss of contracts.
- Cyber extortion. There are many instances when hackers request a ransom payment from large organisations in exchange for stolen data. Cyber extortion coverage helps the company with costs incurred in hiring experts to negotiate in such incidents.
- Cyber fraud. Cyber fraud coverage helps in cases where company computers were used to commit fraudulent activity and theft.
- Third-party liability. In the instance of a cyber-attack, the company incurs costs for investigation and defence. The company has to pay for managing the impact of the incident which includes customer notification, and public relations. Third-party liability coverage helps the company recover these costs.
For a company to choose the right insurance coverage, identifying exposure to risks is the first step. This will help determine how much proprietary or confidential data the company holds. Another consideration is the company’s dependence on computer systems as well as the size of the operation. These guiding factors help narrow down coverage options for cyber and data risk insurance.