In the digital age, from individuals to businesses, everyone is talking about or is a part of emerging technology trends.
However, every technology introduced in the market has only one motive “To ease the work”, but even the moon has a dark side, similarly, even technology has fueled the growth of cyber-attacks.
Many major brands are the victims of these cyber-attacks and losing out their sensitive data to cybercriminals. This issue has become so severe and prevalent that the Lloyds Risk Index 2013, now positions cyber risk at the top with high taxation and loss of customers as one of the third largest alarms for senior executives. And the recent years have witnessed a growing demand for cyber insurance to cover cyber breaches, including the cost of putting things right after an incident, and handling fines and civil claims.
Broker Marsh reported that the number of companies buying cyber insurance has increased by a third between the years 2011 and 2012. However, still, there are many that don’t make insurance for one of the crucial part of their cybersecurity strategy. The market for cyber insurance is poor in Europe; however, in the US around $500m, cyber-related premiums were paid by businesses in 2013.
But do you know the risks faced by insurers today?
Well, helping individuals and businesses from the catastrophic risk of providing coverage to businesses with cyber risks, the insurance industry landscape has been completely changed over the years. However, Lloyd’s of London clearly mentioned in their report that economic losses due to a single disruption in the cloud can cost around $121 billion. After so many evaluations, we can confidently say that cyber risk is much greater and costlier than catastrophe events like Hurricane.
And the biggest challenges faced by insurers today is pricing the coverage on products as in the scenario of disasters insures can easily check weather estimations and set prices for the individuals or businesses. But in the scenario of cyber risk, it is unpredictable. Because many breaches, outages and allied financial losses are kept confidential and therefore go mostly under-reported. Therefore, the insurer can’t decide foolproof, what security controls should be taken into consideration while preparing contract’s terms and conditions. This is just one issue.
Another issue affecting the insurers is unavailability of sufficient tools. Well, many insurers don’t have the right tools that can help to accurately evaluate and respond to the increasing levels of cyber-risk businesses are uncovered to. According to a report by Hiscox Insurer in February stated that approximately three-quarters, which are 73% of global firms, are “cyber-novices” when it comes to the excellence and execution of their security approach.
What these corporations need to do?
Corporations need to find an effective way to understand how parallel they are to their peers, in terms of digital flexibility and in terms of real sufferers, but their competitors are clearly reluctant to share such data. This is where more established insurance services providers can come into play as the insurer will come to know which breeds of organizations are hurt through breaches, how frequently, and at what measures, because they can obviously understand when you need to pay.
Have you heard about “non-smoker discount” in the insurance industry?
In the insurance security, there’s a non-smoker discount for individuals with more life expectancy. As insurers have researched that people who don’t smoke, live more than the people, who die in accidents, take drugs, disasters, etc. Thus, they provide a discount to non-smokers.
For deciding on non-smoker discount, underwriters turned to medical professionals to understand the terms of life expectancy and provide viable discounts to non-smokers.
In the same way, insurers need to assess the amount for businesses that may become victims of cyber-attacks. It is tough for insurers because they cannot anonymously take an X-ray of a potential client’s network to analyze how prone the business is to cybercriminals. This is the biggest disadvantage for the insurance companies as well as businesses as they might be left with insufficient coverage in significant areas. Insurance firms require experts that can help them to gather such crucial information and make the evaluation process for setting premiums easily.
Well, cyber insurance is a worthwhile investment for businesses, however, you won’t get back your lost data but some amount of money will be given to your firm to regenerate it. We understand that the impact on your company will far more and greater as you will lose your reputation, your customers, government oversight, etc. Thus, it is advisable to at least take insurance so that you can rebound your business back from such a disaster with an appropriate amount of money.