Cyber insurance is an insurance product designed to protect businesses and service providers against Internet-based risks, and more generally against risks related to information technology infrastructure, information privacy, information governance liability and related activities.
The coverage provided by cyber insurance policies can include coverage against losses such as data destruction, extortion, theft, hacking and denial of service attacks; liability coverage indemnifying companies for losses to third parties caused by, for example, errors and omissions, failure to safeguard data or defamation among other cases.
Advantages of cyber insurance.
Cyber insurance is beneficial in the event of a large-scale security breach. Insurance provides a smooth funding mechanism for recovering from large losses, helping companies get back on track and reducing the need for government assistance.
Disvantages
Although very convenient, cyber insurance is a compensatory measure and cannot be a company's only security measure. This is because insurance is based on actuarial data against a largely static risk context. Since these do not currently exist, buyers of these products are unlikely to achieve the value outcomes they desire. It is therefore very difficult for insurers to quantify the value of the damage caused by a cyberattack.
Conclusion
Even if a company adopts cyber insurance, it is not excused from keeping its technology environment and data secure by taking a proactive stance towards its cyber risks. Even the most basic insurance policies require the company that is purchasing the product to take an active stance in managing its assets, seeking to maintain a high standard of security for its data. So the best approach a company can take is to discover, monitor, and remediate its risks.
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