June 21, 2024 | By christa

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The Hidden Pitfalls of Cyber Insurance

• IT Consultant

Cyberattacks have become a crucial risk for any company, no matter its size: the global average cost of a data breach crested a record $4.35 million in 2023. As cyber threats proliferate, cyber insurance continues to grow in popularity as a way to help reduce the financial fallout stemming from data breaches, network outages, and other cyber losses.

But cyber insurance policies can be tricky and, in fact, they come with hidden pitfalls that can leave your business unprotected despite having a policy.

The dangers of misinformation and a lack of understanding of cyber insurance applications will be tackled in this article, alongside how LeadingIT can help you overcome this important step.

Why Accuracy Matters: The Risk of Policy Voidance

After a May 2021 data breach at a Canadian social service agency – involving the online publication of confidential reports to Facebook – the agency sought approximately $75 million in damages but was denied cyber insurance coverage because of a policy exclusion for the display of breached data on websites.

Larger corporations might have the financial means to absorb the cost of such a data breach. However, many businesses would be bankrupted by such a loss, which is why it’s important to understand the fine print.

Cyber insurance policies are seldom the ‘set-it-and-forget-it’ products they’re portrayed as in ads. They are legal documents filled with exclusions, limitations, and specific requirements. In addition to the long list of coverage features that can be bought as separate add-ons, there are a number of specific details that can be critical to the policy journey. Here are some of them:

• Coverage Exclusions: Cyber insurance policies typically exclude certain types of losses, such as cyberattacks caused by employee negligence or acts of war. Make sure you understand what is and is not covered by your policy.
• Security Requirements: Many cyber insurance policies require businesses to implement specific security controls, such as firewalls, intrusion detection systems, and data encryption. Failure to meet these requirements could result in a denied claim.
• Data Breach Notification: Most policies require businesses to notify the insurer promptly in the event of a cyberattack. Failure to do so could jeopardize your coverage.

The Risk of Insurance Policy Voidance

Applying for cyber insurance can be a complex process. When applying, the policyholder commits to answering extensive questions about the condition of their cybersecurity posture: what safeguards are in place, prior breaches, and incident response plans, for instance.

If your business makes an incorrect or false representation at the time you apply for a policy, an insurer may well have good reason to reject a claim or even rescind the policy itself. In the event of a breach, your business could potentially be open to a massive loss.

How LeadingIT Can Help You Navigate the Risk

LeadingIT can be your trusted partner in navigating the complexities of cyber insurance and ensuring you provide accurate information during the application process. Here’s how we can help:

• Cybersecurity Assessment: We can conduct a comprehensive assessment of your cybersecurity posture to identify any vulnerabilities and ensure your security controls meet industry best practices.
• Gap Analysis: We can analyze your existing cyber insurance policy and identify any gaps in coverage based on your specific needs.
• Policy Review: We can review your cyber insurance policy and help you understand the fine print, including exclusions, limitations, and security requirements.
• Application Assistance: We can work with you to gather the necessary information for your cyber insurance application and ensure you provide accurate and complete information.

By partnering with LeadingIT, you can gain the peace of mind that comes from knowing your business is well-protected against cyber threats and insurance pitfalls.

Conclusion: Reduce Risks With LeadingIT

Cyber insurance is an incredible tool for mitigating the financial losses from a cyber attack. However, inaccurate information during the application process can render your policy useless. By understanding the fine print and working with a trusted partner like LeadingIT, you can avoid these pitfalls and ensure you have the cyber insurance coverage you need to protect your business.

LeadingIT is a cyber-resilient technology and cybersecurity support provider. With our concierge support model, we provide customized solutions to meet the unique needs of nonprofits, schools, manufacturers, accounting firms, government agencies, and law offices with 20-200 employees in the Chicagoland area. Our team of experts solves the unsolvable while helping our clients leverage technology to achieve their business goals, ensuring the highest level of security and reliability.