written by DARREN COLEMAN posted on April 6, 2022

The Most Dangerous Assumption You Can Make About Cybersecurity Insurance

Do you think cybersecurity insurance will be your 100% reliable safety net? Think again—it is just one small part of an effective cybersecurity defence.

You may think that simply by investing in cybersecurity insurance, you’ll be covered no matter what type of data breach you suffer.

But that’s not really how it works.

Cybersecurity insurance is difficult to qualify for, rarely pays out the way business owners assume and, frankly, is no replacement for comprehensive cybersecurity.

The Most Dangerous Assumption You Can Make About Cybersecurity Insurance

What Is Cybersecurity Insurance?

Often referred to as cyber liability or data breach liability insurance, cybersecurity insurance is a type of stand-alone coverage. It’s designed to help businesses cover the recovery costs associated with any kind of cybersecurity incident including:

Breach And Event Response Coverage

A very general and high-level form of coverage, this covers a range of costs likely to be incurred in the fallout of a cybercrime event, such as forensic and investigative services; breach notification services (which could include legal fees, call centers, mailing of materials, etc.); identity and fraud monitoring expenses; public relations and event management.

Regulatory Coverage

Given that a range of organizations has a hand in regulating aspects of cyber risk in specific industries, there are usually costs that come with defending an action by regulators from the Office of the Privacy Commissioner of Canada concerning systems such as PIPEDA.

This covers the costs associated with insufficient security or “human error” that may have led to a privacy breach. Examples may include an employee losing a laptop or e-mailing a sensitive document to the wrong person.

Liability Coverage

This type of coverage protects the policyholder and any insured individuals from the risks of liabilities that are a result of lawsuits or similar claims.

Put simply, if you’re sued for claims that come within the coverage of the insurance policy, then this type of coverage will protect you.

Cyber Extortion

This type of cybercrime event is generally a form of a ransomware attack, in which a cybercriminal keeps encrypted data inaccessible (or, alternatively, threatens to expose sensitive data) unless a ransom is paid.

Coverage of this type addresses the costs of consultants and ransoms, including cryptocurrencies, for threats related to interrupting systems and releasing private information.

Does Cybersecurity Insurance Offer Complete Protection Against Cybercrime?

A common misconception is that a cybersecurity insurance policy is a catch-all safety net, but that’s simply not the reality.

Without a comprehensive cybersecurity strategy in place, a business may not qualify for a policy in the first place. Furthermore, in the event of a hack, a business may not qualify for full coverage if its cybersecurity standards have lapsed, or if it can be found to be responsible for the incident (whether due to negligence or otherwise).

The core issue is that as cybercrime becomes more common and more damaging, insurers will become more aggressive in finding ways to deny coverage. It’s in the interest of their business to pay out as little and as rarely as possible, which means the policies will tend to rely on a series of complicated clauses and requirements with which covered parties have to comply.

A key example of this is when Mondelez International was denied coverage for the $100 million of damage they incurred from the NotPetya attack. Their insurer, Zurich Insurance, cited the obscure “war exclusion” clause, claiming that Mondelez was a victim of a cyberwar.

This is not an isolated incident. As discovered by Mactavish, the cybersecurity insurance market is plagued with issues concerning actual coverage for cybercrime events:

  • Coverage is limited to attacks and fails to address human error
  • Claims are limited to losses that result directly from network interruption, and not the entire period of business disruption
  • Claims related to third-party contractors and outsourced service providers are almost always denied

All of this goes to show why business owners need to look carefully at the fine print of their cybersecurity insurance policy and ensure their cybersecurity standards are up to par. No one should assume they’re covered in the event of a cybercrime attack—after all, for every $1 million paid in premiums, insurance companies only pay out $320,000 in claims.

It’s important to understand that the way you manage your cybersecurity can directly affect the coverage and premiums you qualify for. The more robust your cybersecurity posture is, the better you’ll do with carriers. Your investment can potentially return on lower insurance expenses.

Don’t Overlook Proactive Cybersecurity Protection

As important as cybersecurity insurance is, don’t forget that it’s simply one part of an effective cybersecurity defence. You also need to protect your organization proactively.

After all, did you know that, on average, there’s a cyber attack every 39 seconds?

It could be a ransomware infection. It could be a phishing email. It could be one of the many other methods cybercriminals employ today.

The point is that cybercriminals have an extensive arsenal of weapons to attack with—are you hoping your lone firewall will be enough to keep your business safe from all of them?

Coleman Technologies Will Protect You With Multi-Layered Cybersecurity

The Coleman Technologies team understands that a single layer of protection simply won’t cut it—we’ve been in the business long enough to know that a simple cybersecurity defence will soon lead to a data breach.

Our team provides cybersecurity and technology services for organizations like yours—we are available to help you develop a robust cybersecurity defence, minimizing the chance that you’ll ever have to make a claim on your cybersecurity insurance.

You can start improving your cybersecurity and get the insurance policy you need by getting in touch with the Coleman Technologies team.

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