Doing business online is convenient. Storing records online can save valuable office space and make those files accessible to anyone with an internet connection.
In an increasingly paperless world, it seems like everything is online now. This development has its upsides but it has one large drawback. Hackers can access a company’s data and do whatever they want with it. Sometimes they encrypt a company’s files and demand a ransom payment for their release in a ransomware attack. These attacks are becoming more common.
Why Cyber Insurance is So Important
Most modern businesses store all kinds of information online. This can range from customers’ credit card numbers to employees’ social security numbers. If there’s a data breach and you don’t have cyber insurance, you could be held liable for any costs incurred due to the cyber attack.
Some of these costs may include paying the ransom for a ransomware attack, paying legal fees if data was stored improperly, hiring computer forensic experts to attempt to retrieve the data that was stolen, and fixing or replacing any computer systems that were damaged in the attack. Cyber insurance can cover all the above costs and more depending on your policy.
Why Does Cyber Insurance Cost So Much?
We’ve already covered why it’s vital to have cyber insurance. But there are a few reasons why it costs so much today. For one, cyber-attacks are on the rise. This means that cyber insurance companies have been forced to pay out sums to cover the losses of those they’ve insured. The rise in cyber-attacks has another consequence: more people want cyber insurance. If you know about business models, when there’s more demand for a product, the price goes up.
There’s also the fact that cyber insurance may have been underpriced for years leading up to 2020. The pandemic saw an explosion of cyber-attacks as people were trapped in their homes and desperate for money. It was so bad in 2020 that cyber insurance companies had a direct loss of 72.5% according to the Wall Street Journal. This means they spent 72.5% of the premiums they received on cyber insurance payouts. The only way for insurance companies to recoup some of that money was to raise their customers’ premiums.
Looking Ahead
Unfortunately, it seems that hackers are often one step ahead of cyber security and cyber insurance. In fact, according to the U.S. Government Accountability Office (GAO), one of the reasons that the cost of cyber insurance is going up and the amount of coverage is shrinking is due in part to “The uncertainty about future threats.”
Despite its cost, having adequate cyber insurance can save you and your company a headache, not to mention a great deal of time and money.
