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Cyber Insurance – What you need to know

Cyber Insurance – What you need to know

New risks require new solutions

As businesses have progressed over recent years to be ever more reliant on technology and digital solutions, so a whole new range of risks has been created.    There are risks associated with data breaches and IT systems failing or becoming damaged which are not adequately covered by standard business insurance. 

The cost of potential business interruption, lost income and even the damage to a company’s reputation arising from some kind of incident, whether malicious or not, can run into some big numbers.   Cyber Insurance is the antidote to these new risks.  

So, what is Cyber Insurance, and do you need it?

A UK government survey conducted in 2014 estimated the cost of a cyber breach for an SME to be between 65k – 115k.  The same government survey estimated that 60% of small businesses suffered a cyber breach in 2014, with this increasing to 81% of large corporations. Businesses are particularly at risk if they hold sensitive customer details including, names, addresses and banking information; If they rely heavily on IT systems and websites to conduct their business and if they process payment card information as a matter of course.   

Cyber Insurance is split into two types of risk, first party and third party risks.  First party risks are those which affect the businesses own digital assets such as data and software.  It would also include business interruption, cyber extortion, digital money theft and reputational damage.  Third party risks cover the risks of others (your customers) and would include loss of third party data, privacy and security breaches (the cost of defence and associated civil damages). 

These kinds of risks affect a very large proportion of businesses, and although standard business insurance may cover some of them, it is worth considering a stand alone Cyber Insurance policy.  A stand alone cyber insurance policy will offer a more comprehensive and specific cover against the main risks associated with cyber attacks and data breaches as well as the cost of rectification. 

Managing cyber risks  

Alongside arranging adequate insurance, business should also put measures into place to manage their own cyber risks.  These can then be analysed and measures put into place to minimise your exposure to risk.  

  • Identify and asses the first and third party risks associated with any IT systems or networks within your business.
  • Think about potential events which may cause first or third party risks to arise in future. 
  • Look at the controls which you currently have in place to identify and manage this risk potential and whether you need to improve them. 

This kind of active risk management, as well as helping you to get an understanding of where your risks lie, will also help you to identify vulnerabilities and put measures into place to mitigate those risks as far as possible. 

The Association of British Insurers (ABI) has produced a useful downloadable guide for SME’s ‘Making Sense of Cyber Insurance – A Guide for SME’s, which gives a useful overview of the risks and insurance products which protect against them – it can be downloaded here.  

GM insurance Brokers, as specialist brokers to business are able to offer advice and information on insuring your business against both cyber and real world risks – for more information on our range of products or to discuss your insurance needs – just get in touch.  

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