Can Cyber Insurance Effectively Protect Businesses from Data Breach Losses?

[johny899]

Have you ever thought whether cyber insurance would actually help your business in the event you got hacked? I have, and frankly, it doesn't lead to a simple yes or no answer. Let's explain it in plain, simple terms.

How Cyber Insurance Works​

Cyber insurance helps address exposures after a data breach. Depending on your insurance policy, it could pay for the following activities:

• Lawyers if customers want to sue.
• Investigatory expenses to try to determine how the hacker got in.
• Public relations expenses to repair your company's public image.
• Customer notifications to alert your customers their information was hacked.

Helpful information, isn't it? Keep in mind that this cannot change everything. Just as car insurance does not pay for every scratch on your vehicle, neither does the Cyber insurance policy submit claims for every failure.

What This Will Not Do​

The hard truth is that insurance cannot replace bad trust. If your customers lose trust, no amount of money will return them back to your brand. In addition, many policies do not cover:

• Upgrading outdated systems you should have upgraded.
• Any future loss of profit caused by the breach.
• Any fines that may have happened caused by ignoring data privacy.

So while insurance is helpful, it is not a full safety net.

Getting the Most Out of the Plan​

From my own experience, cyber insurance creates value if coupled with good security practices. Think about it like locking our doors and getting home insurance — it is prudent to do both.

Here are some easy and simple ways to be safer:

• Use complex passwords (no more "12345")
• Teach your people not to click on suspicious links.
• Back up your data if it gets locked or hacked.
• Perform software updates to fix known security vulnerabilities.

If you think of these actions along with a good insurance program, you are putting your business in a much better place.

In Conclusion​

Is cyber insurance worth it? If so, the short answer is yes; however, only as a component of your security plan. Cyber insurance is a safety net from a financial standpoint, not an invisibility cloak.

Consider this: do I feel more secure operating my business with it? If yes, then get it. Just keep in mind that you, and your risk management practices as a business owner, are the main heroes here. Cyber insurance is simply there to help you weather the storm.