CYBER SECURITY IS GAINING MORE ATTENTION, BUT INSURANCE COVERAGE IS FAILING TO MEET COMPANIES’ NEEDS
Cyber security is becoming a major issue and the growing prevalence of malicious attacks of businesses is leading to a higher demand for cyber insurance. There are now 50 carries of cyber coverage in the insurance industry, but these coverage is not easy to obtain and many businesses suggest that most coverage is inadequate. The problems with cyber protection are related to the complicated nature of cyber attacks. The actual damage these attacks cause, in terms of financial loss, is difficult to quantify, making it hard for insurers to provide adequate insurance coverage.
DIGITAL THREATS ARE STILL NOT WELL UNDERSTAND BY THE INSURANCE INDUSTRY
Cyber threats are plentiful, but they are also still quite new to the world. In the past, the insurance industry only had to deal with physical risks that could cause damage that was easily accounted for. In the digital word, however, damages caused are more difficult to keep track of and underwriters do not yet have enough information to estimate the likelihood or the cost of a major attack. In this way, cyber attacks are very similar to natural disasters, in that they are unpredictable and could cause a wide range of financial damage. Unlike natural disasters, however, the insurance industry does not yet have a firm understanding of how digital catastrophes can be mitigated.
POLICIES ARE NOT YET CAPABLE OF ADDRESSING THE VARIOUS ISSUES CONCERNING CYBER SECURITY
Typically, a company seeking protection against cyber attacks can find a $300 million policy. While this may be enough to cover some modest attacks, a data breach at a large company could easily cause billions of dollars in financial damage. In 2011, Sony suffered a major data breach that caused more than $2 billion in damages. This attack also compromised the financial information of millions of the company’s customers, which later affected Sony’s reputation.
A DAMAGED REPUTATION CAN BE MORE COSTLY THAN A DATA BREACH
The policies that are considered to be the best available on the market offer coverage for services that alert consumers of data breach, forensics services, call center setups, identity monitoring, and legal fees. Most policies due not provide protection for any loss in profits due to customers losing faith in companies targeted by cyber attacks. In the digital age, a damaged reputation is proving to be significantly more challenging to recover from than a data breach.