With the increased threat of cyber risk, insurance has become a top-of-mind issue for organizations of all sizes and industries. Risk managers, business owners, and technologists are turning to insurance professionals to guide them in protecting their businesses. Despite this increased demand, there still remains apprehension when it comes to what a policy covers and what cyber insurance to invest in. Cyber insurance is one of the fastest-growing sectors in the insurance industry and as an insurance professional, it is imperative to stay relevant in today’s risk landscape. To put it simply, we’ve gathered 9 reasons why organizations should invest in cyber insurance and you can apply these in conversation with your insureds.
Reasons to Invest in Cyber Insurance
1. Protection against financial losses
The consequence of a cyberattack can be financially fatal for any business. It can result in business interruption costs, legal fees, and regulatory fines. According to IBM, the global average cost of a data breach in 2023 was USD 4.45 million. This marks a 15% increase in financial losses from a cyberattack over the last 3 years. In the event of an attack, cyber insurance ensures that a business can recuperate losses and financially recover. Cyber insurance is the way to protect against those losses through policies that provide coverage for direct financial losses, such as lost revenue, as well as the costs associated with remediation, including hiring outside consultants or forensic investigators.
2. Coverage for a range of cyber incidents
Cyber insurance has the potential to provide coverage for incidents like data breaches, network failures, cyber extortion, and more. As a result, 51% of organizations are planning to increase security investments in the near future. At a time when cyber insurance brokers have taken on an increasingly, outward-facing, advisory role in their client engagements, brokers have to be well-informed and armed with an understanding of the standard coverages available before approaching carriers directly so clients can access a more bespoke cyber liability package.
3. Incident response assistance
Cyber insurance providers offer incident response assistance. This includes access to experts who can help contain and mitigate the damage of a cyberattack. This can be crucial in reducing the impact of an attack on your client’s business and is a highlight of working with cyber insurance providers. On average, organizations with instant response teams and tested plans incur costs that are $2.6 million to $2.7 million less than those without plans or practice. Companies that have not invested proper time and care in incident response preparation have significantly longer RTOs, with an average recovery time of 21 days. This shorter downtime also helps to manage reputational damage and associated costs.
4. Protection against third-party claims
When a third party has been impacted by a cyber incident they may file a claim against the party that was the direct victim of the attack. Cyber insurance can provide protection in such instances. This coverage can help insureds avoid costly lawsuits, maintain positive business relationships, and provide coverage for damages, settlements, and legal fees associated with third-party claims. As an insurance professional, you will be expected to assess an third-party cyber security risks that may impact your insureds by assessing the contractual obligations between them and their vendors. Occasionally, you may need to ask these third parties for proof of a cyber insurance policy in order to ensure your client’s protection in the event of a cyber incident.
5. Reputation control
A business is contingent on its reputation and a cyberattack can cause significant reputational damage. Cyber insurance coverage often helps to mitigate that damage with public relations and crisis management. Carriers have a pre-selected panel of experts to help mitigate the damages in these scenarios. Educate your clients on how cyber insurance can protect their reputation in the event of an attack. Furthermore, some insurance policies cover advertising expenses and public relations expenses.
6. Competitive Edge
A robust cyber security strategy is not only a valuable asset but it offers a distinct competitive advantage. Today, cyber insurance is a must-have that indicates an organization is better prepared to handle the risks associated with cyber incidents. Investing in cyber insurance helps build customer trust and enables businesses to protect their capital and continue running business smoothly. According to Aon’s 2023 Cyber Resilience Report, major cyber incidents resulted in a 9% decrease in shareholder value. So not only is cyber insurance more attractive to customers but it offers shareholders that same assurance.
7. Compliance with regulations
There are many industries with regulations concerning data protection and cybersecurity. It is essential that your clients have cyber insurance so that they are more likely to comply with these industry regulations. Compliance efforts are aided by risk assessments, cybersecurity audits, and coverage for fines and penalties associated with regulatory violations.
8. Increased resilience
Investing in cyber insurance grants a business increased resilience to cyber threats by making it easier to recover from an attack. Inform your clients of this, since a cyber incident can have a significant impact on their business. In addition, insurance policies can cover business interruption, lost income, and extra expenses related to recovery.
9. Peace of mind
Cyber insurance offers peace of mind to business owners and the comfort of knowing they are protected against a cyberattack. Help your clients understand that cyber insurance is an investment in the future of their business and peace of mind in an uncertain cyber landscape. Businesses can feel confident that they are protected against the most common cyber risks with cyber insurance policies.
Cyber risk continues to increase and insurance has become a top priority for many organizations. As an insurance professional, the industry is constantly changing, and staying up-to-date is the only way to offer viable insurance solutions to your clients.
