Cyber Liability Insurance (CLI) protects businesses against the risk of cyber-related incidents. These threats typically target network and information technology systems, often leading to security breaches. In some cases, they may result in unauthorized access, system modification, and even the destruction of equipment.
What makes cyber liability insurance different?
How does cyber liability insurance differ from other insurance policies? Here are six primary characteristics of this type of insurance:
1. It is an emerging market
The cyber liability insurance market grew from $2 billion in 2015 to $3 billion in 2017. It is expected to reach $12.5 billion by 2021.
Cyber liability is one of the fastest-growing lines of business for insurers. Among the areas that have experienced the fastest growth are:
- Cyber extortion insurance (CEI)
- Data breach ransom coverage
- Privacy policy insurance (PPI)
Like many industries, the cyber liability insurance market is volatile and ever-changing. But it has enjoyed a significant increase in participation rates. Many insurers have increased their capacities in order to handle the rising volume of cyber liability insurance purchases.
Over the past few years, hackers have employed increasingly more sophisticated methods. Ransomware attacks have also become more widespread. Thankfully, many insurers have stepped up to combat the growing threat, offering businesses owners a wider range of policies.
2. It protects against unique threats
Cyber-attacks can have devastating consequences for companies that have been targeted. Ransoms for stolen or illegally restricted data were previously in the five-digit range. Nowadays, it isn’t unusual for cyber criminals to demand six-figure sums or more.
New attacks emerge all the time as technology progresses. Businesses should adjust their cyber policies correspondingly to ensure continued protection.
The good news is that cyber liability policies have become more sophisticated as well. Nowadays, businesses can take advantage of cyber risk protection and resilience protocols along with incident response support. These added coverages provide businesses with more effective protection against cyber-attacks.
3. It is subject to unique supply and demand issues
As the increasing number of attacks stimulates demand, it also creates a supply problem. Some insurers have become hesitant to provide the necessary coverage and have become less open to supporting cyber liabilities. Furthermore, the lack of historical loss data adds another layer of unpredictability.
4. It is a more complex field than most
The cyber-risk insurance market is quite complex, with many possible threats. Furthermore, these often come in combinations and are constantly changing. This is why many insurers have considerable difficulty implementing policies that provide appropriate coverage.
5. It has yet to be standardized
Unlike other policies, cyber coverage has yet to become standardized. Because of this, it is more important than ever for companies looking to purchase cyber liability insurance to do plenty of research beforehand.
Researching and understanding policy terms are extremely important. These two factors are vital for preparing businesses and insurers for the future.
6. It is associated with short-term problems
Businesses and insurers have to deal with many short-term problems on top of the inherent risks of cyber liability insurance. The market is more volatile than ever, with risks and prices constantly fluctuating. These factors cause many insurers to shy away from providing coverage for some businesses.
Companies will have to implement the appropriate measures to prevent cyber-attacks from affecting performance and profitability. But even this is not enough in most cases. Businesses will also have to obtain insurance against potential threats.
What can businesses do to guard against cyber threats?
So how can businesses deal with the ever-growing threat of cyber-attacks? Possible courses of action include:
- Combining long-term strategies with short-term action plans
- Start building up protection with small steps
- Top-up security measures over time
- Focus on needs rather than price when purchasing cyber liability insurance
- Adopt a proactive defense against cyber-attacks
- Emphasize prevention rather than the cure
Conclusion
It can’t be stated enough: cyber-attacks are becoming more sophisticated every day. In some cases, the protection that a business purchases now may be insufficient or totally ineffective next year.
Companies would do well to work closely with their insurers. It is also advisable to develop a resiliency plan that could help the company recover from cyber-attacks. With adequate coverage and a well-implemented recovery plan in place, businesses will be able to recover more quickly and resume normal operations as soon as possible.
About Arroyo Insurance Services
Arroyo Insurance Services was officially established in 1986, but we have roots dating back to before 1950. One of California’s leading client-oriented and independently owned agencies, we have over 140 employees with a combined experience of over 450 years, spread across 11 locations. We are committed to providing the best insurance and risk management services at the most competitive premiums, and backing it with hands-on service tailored to our customers’ needs. For more information on how we can mitigate your risks, contact us today at (877) 220-4769.