Cyber Insurance

by 22:05 0 comments Cyber Insurance

By: Sonali Mehla, BCA 4th Sem, 1st Shift

Cyber insurance is an insurance product used to protect businesses and individual users from internet-based risks and more generally from risks related to information technology, infrastructure and activities. Risks of this nature are typically excluded from traditional commercial general liability policies or at least are not specifically defined in traditional insurance products. Cyber insurance typically covers expenses related to first parties as well as claims by third parties against losses such as data destruction, extortion, theft, lacking and denial of service attacks.

Virtually, every business relies on data and computer systems. When these systems experience a virus or other computer attack, a business is at real risk of losing critical information that is essential to the daily operation and potentially exposing itself to third party liability. Computer viruses are the growing problem and a cyber attack can significantly impact a business’s bottom line. Cyber risk insurance provides broad affordable cyber liability protection specially designed for small business to address the growing threat of information security exposures. The cyber liability insurance helps pay for the costs associated with computer restoration and data recovery and the coverage also protects against third party liabilities a business might have a failure of system security.

AN ASSESSMENT OF CYBER INSURANCE:

2014 marked an important milestone in the growth of cyber insurance with a significant jump in both the number of companies offering cyber insurance and the number of firms buying cyber insurance. Currently, over fifty major insurance providers now offer cyber liability insurance coverage. Demand for that insurance rose by 21% across all industries in 2014 as compared to 201, with financial institution representing the biggest increase of 29% in coverage buying.

Value and importance of cyber insurance – A cyber insurance marketplace is an important component of a strong cyber security program. It serves as an important risk transfer mechanism. Cyber insurance allows a company to share the cost of an incident amongst the pool of insured companies. It motivates customers wishing to be insured to follow god cyber security practices as eligibility for insurance or preferred rates, are likely to be based upon whether the insured passes recommended practices or pass certification audits.

Adding to challenges is the constant change and innovation being experienced in cyber space. In just the last few years we have seen the dramatic growth of social networks, mobile and the cloud, the emergence of the Internet-of-things, wearable, 3D printing and the sharing economy, and in the near-future we are likely to see drones and self-driving cars. These new products, services, business models, and interdependencies impact both the form and likelihood of a cyber-attack occurring and the nature and severity of the resulting loss. Cyber insurance will have to keep up with these changes, updating their risk and pricing models.

There are a number of factors driving the growth of a healthy cyber insurance marketplace, but there are still many unknowns and issues that will need to be addressed for the cyber insurance market if it is to continue to grow, prosper and add value. The financial services industry is uniquely positioned to play a key role in helping to identify, address and resolve these barriers and issues as it includes representatives of both large buyers of cyber insurance (example-banks), and the insurers who partnering with leading cyber security professionals can work together to find solutions satisfactory to both buyer and seller.