When Do You Need Cyber Insurance in 2022?

When do you need cyber insurance. With the rise of digital/tech-driven businesses it can be difficult to decide when you need cyber insurance. This trend only looks to continue. While digital business has made work easier, it also creates new cybersecurity risks. A business doesn’t have to be in the tech industry to store lots of important data. Data could range from customers’ financial information to health records. Businesses do not want to lose access to their own systems or face a ransomware attack either.

Many companies are wondering if they need cyber insurance to help protect themselves from a cyber incident. Your clients might not be specifically asking about the need for cyber insurance. However, they should at least consider these policies. It could assist their risk management.

“Any business with an online component or one that sends or stores electronic data might benefit from cyber insurance, as may any organisation that relies on technology to conduct its operations, which is pretty much every business,” explains a ZDNet article.

That’s not to say that every business will necessarily end up needing cyber insurance in 2022. It’s possible they’re comfortable with the risk and liability. Or if they feel they have sufficient coverage through existing policies. Insurance agents may want to proactively discuss this topic with clients and help them figure out where they stand. 

Having these conversations can help build relationships with clients. It might help you understand their businesses better. Now they might come back to you if they end up deciding they need cyber insurance or other types of coverage in the future. 

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Review Current Policies

When do you need cyber insurance? You don’t want to be asking that question after a cyber attack occurs. You could be left on the hook for more than you can afford in financial damages. Instead, insurance agents may want to help prospects and clients review their current policies. Explore what is and isn’t covered with them. Now businesses can better determine if they need a separate cyber policy to cover some gaps.

“Be aware that just because you have other policies that may be activated in the event of a cyber incident, there are probably gaps around which damages they’ll actually pay,” notes Woodruff Sawyer, an insurance brokerage and consulting firm.

So, insurance agents can help business owners understand issues like:

• Which of their current policies might be activated following a cyber attack?
• What would be covered under existing policies in the event of a cyber attack?
• What are the policy limits regarding cyber incidents?

If a business is currently satisfied with their coverage, they could still change their mind in the days to come. As a company grows, their risk profile changes. Business owners might come to realize that they’d prefer to obtain a separate cyber policy to help cover what their existing policies do not protect against. 

Assess New Risks

So now you’ve helped prospects and clients understand their existing coverage relating to cyber. Now it’s time to address new risks they’re facing and whether cyber insurance could protect against financial fallout. Insurance agents may want to help businesses review how their risk profile has changed based on areas like:

Working From Home

Many companies now have employees working from home. The practice of checking important data remotely from time to time has increased as well. With the new mobility come new cybersecurity risks. 

As cybersecurity company Fortinet notes: “When employees use unsecured networks and devices to perform their jobs, such as free Wi-Fi networks, they leave gaps in cybersecurity for criminals to exploit.” 

Businesses with remote employees may be worried about new risks. They might be more inclined to take out cyber insurance policies as part of their overall risk management adjustments.

IoT Devices

Employees are working from home with company devices. But that’s not the only thing to see as a potential risk. There is the Internet of Things (IoT) devices — things like smart thermostats and equipment sensors. These devices are valuable and widely used, but also potentially raise cybersecurity concerns.

“To appropriately manage device security, organizations need to know what typical event log data looks like so they can recognize and detect abnormalities that might indicate a security event. However, the number of IoT devices an organization maintains makes this type of data aggregation a challenge,” notes SecurityScorecard, a cybersecurity company.

So, organizations that have added many IoT devices may want to take a closer look at how cyber insurance policies can help them mitigate financial risk in 2022.

Emerging Cyber Threats

Companies also have to consider the changing landscape of cyber threats, like the emergence of new ransomware attacks. 

In fact, the growth of ransomware has caused insurers to adapt their underwriting. From Gallagher, a risk management and consulting firm: “They have also examined their ransomware claims, seeking to identify vulnerabilities commonly exploited in successful attacks. Their findings have driven them to ask more probing questions during the underwriting process and to raise their thresholds for what they consider to be satisfactory responses.”

Amidst these changes, insurance agents may need to spend more time helping companies understand their options. Present obtaining cyber insurance if they want to reduce the risk stemming from new cyber threats.

Weigh the Cost/Benefit of Different Cyber Policies

Insurance agents can help current clients and new leads assess their circumstances. Then they can see how cyber insurance policies can reduce their risk. Not every company necessarily is the right fit for cyber insurance. Especially if they’re ineligible based on evolving underwriting claims. Some might not have enough at stake financially for the benefits to be justifiable. For others, the cost of a cyber insurance policy may be worth it if it reduces the risk of losing money. Data recovery fees start to add up.

Either way, it can be useful for insurance agents to walk clients through this area. For obvious reasons it can be somewhat confusing. Not only is cyber insurance a relatively new area, but there can be many differences between policies. Businesses might need more guidance than they would for more established lines of coverage.

As Fundera, a small business financial solutions marketplace, explains: “Cyber liability coverage can vary widely based on which insurer you’re purchasing the insurance from. The reason is that there’s no such thing as standard cyber liability insurance. Insurers have started offering cyber coverage only within the last couple of decades.”

Take the time to help business owners weigh the costs vs. the benefits of different types of cyber insurance policies. Insurance agents can potentially grow their books while also deepening client relationships.