Cloud computing has revolutionized the relationships between the Internet, its users, and how their data is stored. More and more businesses, such as banks and CRM solutions, are hosting their services online, providing greater accessibility and options for customers to use. However, this virtual proliferation comes at a risk: with terabytes of sensitive information being uploaded twenty-four hours a day, seven days a week, around the world, the chances of data loss and theft is ever-present. That is where cyber insurance steps in.
What Does Cyber Insurance Look Like?
The real world and the Internet exist in each other’s realms, even though one is, by definition, “real”, and the other is a technological construct. Ergo, while a general liability policy might protect a laptop or a server rack in the event of physical harm, the insurance has no say on the data stored on those devices. The agency will reimburse a small business for the loss of the hardware, but the intellectual property would be considered a write-off. That, however, is where cyber insurance comes into play. Cyber insurance policies deal directly with the possibility of data being affected.
Specific cyber insurance policies are based on the ability of a business to take care of itself. Much like car insurance won’t touch a driver with a history of problems, cyber insurance agencies want to know that a company does what it can to ensure the safety of its data. To that effect, firewalls, anti-virus and anti-spyware procedures must be in place before a policy can be drawn up.
Earning A Policy
To evaluate a company’s readiness to deal with cyber-threats on their own, the company applying for cyber insurance must conduct an assessment of their current security setup. For large organizations, this might mean hiring a third party to write a report for the insurance agency that details the safeguards in place: password management, contingency plans, employment investigations, etc. A small business will have a smaller purview, so they might be create their own, smaller summary for the insurance agency, to prove their worth for a policy.
Risks, Preparedness and Rewards
How serious can the compromise of data be? A security risk assessment firm estimated that a typical breach exposed 100,000 customer records. Those could be anything from bank statements to medical profiles. A failure like that would inevitably incur lawsuits, leading to legal defenses, settlements, and lost business, customers and reputation.
With so many threats out there – natural disasters, hacking, even a malicious social media comment – there are, similarly, several cyber insurance options available. Policies could cost up to thousands of dollars a year, with add-ons running into hundreds of dollars a year.
As a medium for conducting business, the Internet isn’t going to go away. And while it can be a scary, threatening place, safe policies and practices are available to keep customers’ data safe, and company’s standards intact.