How cybersecurity and insurance can reduce risk

Data breaches, ransomware attacks, and social engineering scams are becoming commonplace. The economic damage caused by cyber incidents is increasing year by year, making it difficult for organizations to recover. Average cost of a data breach ( $4.45 million) has increased by 15% over the past three years, but the median cost of recovery from a ransomware attack is approximately $1.82 millionexcluding ransom costs.

In order to proactively offset these risks and reduce financial risk, more Organizations choose cyber insurance to partially cover losses due to various information risks. In other words, insurance should not be a substitute for cybersecurity. There are five reasons why.

1. Cyber ​​insurance only covers a portion of economic losses

When an attack or breach occurs, much more is at stake than money. Cyberattacks can lead to loss of intellectual property, loss of customer trust and confidence, loss of reputation, and loss of competitiveness and productivity. These losses can be difficult to quantify, and insurance claims may not recover all of them.

2. Paying the ransom does not necessarily guarantee results
Insurance money may help pay the ransom, but paying the ransom does not necessarily guarantee that threat actors will release encryption keys or return hijacked data. there is no. Most victims (92%) You cannot receive your data after paying the ransom. There is also no guarantee that the attacker will not repeat the crime. On the contrary, paying the ransom only encourages malicious actors to continue their attacks.

3. Cyber ​​insurance also has exclusions.
As cyber attacks increase, so do insurance claims. rising, poses additional risks to insurance companies. To offset these losses, insurance companies have begun tightening their policy guidelines. Introducing exclusions This allows us to refuse or reject your claim under certain conditions. for example, twenty one% of cyber insurance policyholders explicitly exclude ransomware.While this is a standard clause between insurance companies, the surrounding text is war exclusion Cloudy at best. It is very unclear to define whether hacktivists operate alone or in collaboration with nation-states. Geopolitical adversaries typically deny any ties to ransomware gangs.

4. New disclosure rules increase insurance risk
of Securities and Exchange Commission (SEC) requires publicly traded companies to report a cyber incident within four days of determining whether it has a material impact on shareholders. These new rules will allow insurers to more closely scrutinize their customers' cybersecurity and governance practices. It is also worth noting that the US government is already considering: Completely prohibited Regarding ransomware payments.

5. Cyber ​​insurance is not a substitute for security obligations
All businesses have an obligation to protect their information assets as well as their customers, employees, business partners and their data. Cyber ​​attacks and data breaches. Merely transferring this risk to a third party insurance company does not relieve it of its liability or obligations.

What can organizations do to reduce their exposure to risk?
Cyber ​​insurance is certainly beneficial for businesses. However, it should only be viewed as a contingency strategy to cover sudden or unexpected risks. Cyber ​​attacks are more inevitable than probable. It is important for organizations to focus on actual mitigation, including technology, people, policies and processes, rather than relying solely on insurance policies. Here are some recommended best practices.

1. Implement a robust cybersecurity program. Implement multi-layered cybersecurity defenses (multi-factor authentication, firewalls, email security, web security, etc.) along with clear cybersecurity policies and processes. Organizations seeking insurance coverage may be required to undergo a security audit to ensure they meet minimum security standards.

2. Train your employees properly. 74% Percentage of cyberattacks and breaches caused by human error. Organizations can significantly reduce their exposure to security incidents by providing in-person training and regular phishing and social engineering simulation exercises for employees to identify and report these malicious attacks. can be reduced.Some cyber insurance providers offer Security tabletop exercises, training videos, breach response scenarios for insureds, and more. Train your employees with these materials, services, and content.

3. Adhere to compliance and regulatory obligations. Be sure to implement industry-leading guidelines, frameworks, and compliance standards to ensure all required and recommended protections and practices are followed. Insurance companies have been known to deny claims if a company is found to be fraudulent. incorrectly stated its observance Comply with certain privacy laws or regulations.

final thoughts
A strong partnership between cybersecurity and cyber insurance can promote a robust security culture and reduce risk. Organizations understand that just having insurance doesn't mean they can skip implementing the necessary security measures. Relying solely on insurance coverage undermines the position of both the insurance company and the policyholder. Both parties are truly happier when strong security protocols are in place, as the overall risk profile is lowered.

When cybersecurity and insurance work together, organizations can build a more resilient security culture. Adjustments benefit both policyholders and carriers by reducing the likelihood of a claim. Cybersecurity plays a vital role in mitigating cyber threats. That requires strong access controls. Ongoing cybersecurity training These include simulated phishing exercises, incident response plans, regular risk assessments, and systems to monitor for indicators of compromise. Proactive cybersecurity measures can significantly reduce the likelihood and impact of a cyber incident, potentially lowering your insurance premiums.

Cyber ​​insurance providers can support your security mission by providing risk assessments, security consulting, and resources to help improve your organization's security posture. Cyber ​​insurance acts as a safety net to ensure an organization's ability to recover from an incident, covering costs associated with incident response, recovery, legal fees, regulatory fines, and potential litigation.

By working closely together, cybersecurity professionals and insurers can share insights, best practices, and trends regarding cyber threats, creating a more stable and secure environment for everyone involved.

Editor's note: Cybersecurity and insurance fraud will be part of the digital insurance discussion. DIGIN conference Held on June 27th and 28th in Boca Raton, Florida. Join us to hear the latest information on this topic.