As cyber attacks and data breaches are on the rise and organizations are spending more money, resources, and time on risk management, it is essential that companies be properly prepared with a solid understanding of the most efficient and effective security measures. Preventative measures through cybersecurity are a must for helping organizations secure their network defenses and implement best security practices. A good response plan can involve cybersecurity insurance, a policy designed specifically to trigger when a security incident results in a financial loss, either due to business interruption, litigation, or provision of additional services such as credit monitoring for customers or employees.
While cybersecurity insurance can help protect organizations after a data breach or network security failure has occurred, it should never be a substitute for cybersecurity and risk management. Since cybersecurity insurance is often misunderstood, here’s a brief look at its benefits and purpose, as well as the best practices for organizations to be better equipped and able to respond in the event of a cyber-attack.
Understanding Cybersecurity Insurance
Cybersecurity insurance (sometimes called cyber liability or data-breach liability insurance) is self-contained coverage designed to help organizations recover from data loss after a security breach or other cyber-related event that affects a company’s network. Having a policy in place can be beneficial for an organization’s overall risk management and response strategy. Benefits of cybersecurity insurance can include cost mitigation involved with security incident investigations and resolutions, as well as paving the way for organizations to more quickly resume normal operations.
Cybersecurity insurance policies exist in two forms—first-party and third-party—and can vary in cost between insurers. First-party cyber risk insurance is a type of cyber liability coverage designed to cover basic risks, especially non-IT firms. Some benefits of first-party cyber risk insurance include funds for notifying clients of a data breach or compromise, credit monitoring for affected customers, and compensation income for businesses that might lose earnings during a data breach. Third-party cyber risk insurance is a type of coverage that protects the persons or businesses who hold responsibility for any systems that permitted a data breach. Third-party cyber risk insurance is designed especially for IT firms and professionals, and even IT freelancers, to avoid the costly effects of lawsuits.
Putting Cybersecurity at the Forefront
As mentioned above, cybersecurity insurance should never replace an organization’s cybersecurity program. In fact, most providers of these policies will want to know that you have at certain security processes in place before they commit to providing coverage. It’s important to know that cybersecurity insurance does not cover stolen intellectual properties, such as product designs or business plans, and it can’t always easily restore an organization’s damaged reputation or sales loss. Before investing in cybersecurity insurance, organizations should perform a risk assessment and impact analysis to fully understand any main areas of vulnerability. Without understanding your risk as well as your risk tolerance, your insurance buying decision will likely be driven more by what seems affordable than what you might actually need. All in all, a robust cybersecurity program can identify and prevent potential threats while also keeping cybersecurity insurance premiums lower.
LBMC Information Security’s team members have extensive experience in a variety of industries with security and compliance mandates. With such heavy regulatory and public scrutiny of your security and privacy practices, our experienced IT compliance and audit specialists can guide you through this maze of regulations. Contact us today.