Cyber insurance re-thinking

Worldwide cyber-insurance coverage is uneven, but recent events have forced us to discover where and what kind of coverage is needed. Cyber-attacks are a destructive issues that simply will not go away. If anything, they will get more numerous and sophisticated as time goes on. Businesses need not be global firms or bring in billions of dollars in revenue; by merely having an online presence, businesses at any level expose themselves to the risk of being hacked. Security breaches do $400 billion in damage every single year. The wide reach of 2017’s WannaCry worm attack, in which business and consumer user data alike was held for ransom on affected machine, seems likely to inspire further evolution of the industry and enlarge coverage.

And of course, free enterprise has risen to meet the challenges posed by hackers. In the wake of hack attacks like those mentioned in our companion article, companies of all stripes are buying up insurance policies left and right. The functions of cyber-insurance (much like technology itself) have shifted over time to meet the needs of policyholders, and are designed to cover not just damage from hacking, but also denial of service attacks and damage wrought by viruses.

Types that are currently offered include hacksurance (against cyber attacks and hacking attacks), theft and fraud (covers destruction, theft, transfer of funds, or loss of data as the result of a fraudulent cyber event), business interruption (covers lost income and related costs where a policyholder is unable to conduct business due to a cyber event or data loss), and even reputation insurance against reputation attacks and cyber defamation. Cyber-insurance is big business, first starting out as a niche market bus exploding in the beginning of the 21st century. Most of it is driven by the North American market, where it is a $1.5 billion industry per research from Aon.

One factor driving this growth is the passing of data breach legislation, which keeps companies honest by making them inform customers and shareholders of attacks they have been subjected to. Sunshine is the biggest disinfectant, so the revelation of embarrassment will lead to the prevention of further embarrassment at any price. Moreover, coverage offering seems no longer the stronghold of large insurance companies; Apple and Cisco recently announced a partnership with German firm Allianz to provide cyber-insurance to those who use their equipment.