Cyber insurance is a specialist business insurance product that deals with the threat of cybercrime and, potentially, malfunctioning IT systems. So how does cyber insurance work? According to NimbleFins, it should connect businesses with experts in both IT and the law to help navigate a cyberattack, security breach, or computer network breakdown. Cybersecurity also works by covering the costs of responding to a cyber incident, plus compensates for the loss of trade or damages paid out to customers.
Cyber insurance provides practical assistance to victims, covering the cost of all aspects of an incident – even reputational management – with some policies funding PR campaigns or call centres to handle enquiries from customers.
Cyber insurance policies generally cover small and medium-sized businesses with a limit of between £100,000 and £5,000,000, depending on the policy, according to the Association of British Insurers (ABI).
What does a cyber insurance policy cover?
Cyber insurance should always include business interruption which covers against loss of profits or increased costs due to a cyberattack or IT failure.
Cyber insurance policies can also cover cyber extortion, managing an attack, restoring documents, repairing systems and expert advice.
Legal advice is the most popular claim made from cyber insurance with 73% of businesses with cybersecurity making use of the experts on hand, according to the UK Government’s Cyber Security Breaches Survey 2020.
Here is a rundown of the types of protections offered with cyber insurance, starting with first-party insurance:
Business interruption: Where income is reduced or profits are affected by unexpected costs after a cyberattack or IT incident.
Managing the attack: Some insurers offer 24/7 support from specialists who can get systems back up and running. Lawyers and computer experts are also on hand to offer practical advice on the laws and processes to follow to protect both the business and its customers.
Investigations: To uncover the root of the incident.
Cyber extortion: Help acting on ransom demands and other malicious attempts to block systems until money is paid. In some cases insurers will meet the cash demand although this is never the best first option.
Notification costs: Funding the unexpected costs required to inform customers and other third parties of a security breach.
Recovering lost data or programmes: Experts can be hired to identify the source of the breach, check systems and re-establish lost files.
Restoring computer systems: Covering the cost of experts to bring computer systems back.
Reputation management: Anything which helps restore credibility among the public whether that be funding a PR campaign or practical solutions such as credit monitoring.
Third-party cover protects against costs and compensation to customers or other third parties such as:
Privacy protection: Legal defence costs, investigation costs and settlements to customers if a business has breached data protection laws and their right to privacy.
Media liability: If a third party has a defamation claim due to a security breach, insurers can cover the cost of investigation, defence and damages.
How much does cyber liability insurance cost?
According to NimbleFins, cyber liability insurance may cost about £240 a year (£20 a month) for a small to medium-sized business. Basic packages start from around £132 a year (£11 a month) but these cover the bare essentials and may not include all aspects of cover available.
Larger businesses will pay more as policy prices depend on the size of an organisation and the nature of its activity. Some with complex private computer networks dealing with a high volume of personal data or payment information would be quoted a lot more than a sole trader using one laptop to send a few emails.
Remember not all policies offer the same protection, so make sure it is covering what you require, such as recovering data, legal advice, cyber extortion or IT system failure.
How to claim on cyber insurance
To claim on cyber insurance, the first step will be to contact your broker (if that’s how you bought your policy) or your insurer. They will advise you regarding the proof or evidence you’ll need to provide, as well as the next steps. It’s critical to initiate a claim as soon as possible following a hack, breach or other cybercrime as the policy might not cover you if you wait too long. There are sometimes specific windows during which a claim must be brought, so it’s good to read your policy documents to understand how this works on your policy.