Insurance

Role of cyber insurance in battling cybersecurity risks

Cyberspace is a treasure trove of digital assets. These assets include sensitive customer data, financial records, and the very foundation of a company – its intellectual property.

Businesses of all sizes rely heavily on these digital assets for daily operations. A single cyberattack on them can have devastating consequences. Downtime, lost productivity, and financial losses are just the immediate repercussions. Data breaches and security incidents can inflict even deeper wounds, damaging a company's reputation and eroding customer trust. Investors, wary of perceived vulnerability, may lose confidence. This makes guarding digital assets imperative.

Cyber security insurance

While advancements are constantly being made in cybersecurity, cybercrime is unfortunately on the rise.

The impact is undeniable. Cyberattacks globally witnessed a 125% increase in 2021 compared to 2020. The financial repercussions are equally concerning. The average cost of data breaches per hour has also seen a dramatic increase, jumping from $2,054 per hour in 2001 to a staggering $787,671 in 2021. The trend continues, with the average data breach costing businesses a hefty $4.35 million in 2022.

With such high stakes, it's no wonder that cyber risk has become a top concern for companies. Boards and CEOs are taking notice – 99% discuss it regularly, with a staggering 80% of CEOs viewing it as the biggest threat to growth.

Stricter regulations and rising public awareness are further amplifying the importance of addressing cyber risk. As a result, companies are increasingly turning to insurance solutions to mitigate these risks.

How cyber insurance combats threats

FBI Director Robert Mueller's warning is stark: "There are only two types of companies: those that have been hacked and those that will be."

While chilling, the warning underscores the urgent need to implement robust cybersecurity risk management strategies.

Cybersecurity threats are a constant worry for businesses of all sizes. A single cyberattack can result in a business incurring significant financial losses, a damaged reputation and disrupted operations. While robust cybersecurity practices are essential, they can't guarantee complete protection. This is where cyber insurance plays a crucial role, offering a comprehensive solution to mitigate cyber risks.

Financial protection:

Data recovery costs, legal fees and regulatory fines are only a few of the cost-heads that businesses incur following a cyber attack. Cyber insurance helps businesses offset these costs and transfer the financial burden to the insurance company, ensuring business continuity after an attack.

Enhanced Security:

Cyber insurance provides more than just financial relief after an attack. The application process itself often involves a security assessment, prompting businesses to identify and address potential vulnerabilities in their systems. This proactive approach acts as a valuable preventive measure, making a business a less attractive target for attackers.

Expert assistance during a breach:

But even the best defences can sometimes be breached. In the event of a cyberattack, many insurance providers offer access to resources such as forensic experts and legal counsel. These experts can play a vital role in incident response, minimising the damage caused by the breach and expediting recovery efforts.

Tailored cyber insurance options:

Cyber insurance isn't a one-size-fits-all solution. Luckily, various tiered coverage options are available to cater to businesses of diverse sizes, risk profiles, and budgets. From basic plans covering data breaches and legal expenses to comprehensive options with public relations assistance and dedicated cybercrime response, you can choose the plan that best protects your specific needs.

Understanding coverage and exclusions:

Cyber insurance policies cover a wide range of liabilities and losses arising from cyberattacks. These include data recovery costs, legal claims from customers, reputational harm repair, and lost revenue due to downtime. However, it's equally important to understand what's not covered. Cyber insurance typically excludes deliberate attacks by insiders, physical damage to equipment, and disruptions caused by hardware or software malfunctions.
By carefully considering your coverage needs and reviewing exclusions, you can select the most appropriate cyber insurance plan for optimal protection.

Cyber insurance market trends

Cyber insurance is a relatively young product compared to other established insurance products. This is evident in the lack of standardisation across offerings. Some insurers provide stand-alone cyber policies. Others choose to embed cyber coverage within existing policies, like adding cyber clauses to property, plant and equipment (PP&E) insurance.

The rapidly evolving nature of cyber threats makes it difficult to define precise coverage boundaries. Data breach reporting regulations, high-profile cyber incidents, and the rise of cyber-related lawsuits further complicate standardisation.

Despite these challenges, the cyber insurance market is experiencing growth. Key drivers include:

• News of prominent cyber incidents: High-profile incidents can impact demand. For instance, the Target and Sony breaches served as catalysts for businesses to adopt cyber insurance policies.
• Regulations: Awareness of cyber threats and regulatory pressure are both shaping the cyber insurance landscape.

Currently, the U.S. leads the market, with Europe and Asia catching up due to stricter regulations and recent cyberattacks.

Conclusion

Valued at $7.8 billion in 2020, the global cyber insurance market is expected to hit $20 billion by 2025, highlighting its growing significance. While robust cybersecurity measures are crucial, businesses should also view cyber insurance as a vital safety net in case of breaches.

By working together, businesses and insurers can create a comprehensive cyber risk management strategy. This collaboration strengthens a company's preparedness against the ever-present threat of cyberattacks.

How can Infosys BPM help?

As cybercrime tactics become bolder and more sophisticated, businesses need a strong partner to mitigate these ever-present risks. Infosys’s Insurance BPO services can be your trusted advisor. We understand your challenges – evolving regulations, ever-changing customer demands, and the growing threat of cyberattacks. Ready to transform your insurance business for the future?