Wait, there are cyber insurance requirements?
In today’s digitally connected world, encountering a cyber incident has become an unfortunate part of running a business.
And that should be no surprise when looking at current trends and stats. Among the alarming numbers:
- In the U.S. in 2023, the FBI’s Internet Crime Complaint Center received a record 880,418 complaints, with potential losses exceeding $12.5 billion.
- Globally, 72% of businesses have been affected by ransomware attacks, according to Statista.
- According to a study by Cybersecurity Ventures, there was a cyberattack every 39 seconds in 2023. That’s up from the 2022 data, which found an incident occurred every 44 seconds.
The financial impact of a cyberattack can be devastating, particularly for small businesses, which is why all organizations should have cyber insurance.
Cyber liability insurance is an insurance policy that covers losses a business may encounter following a cyber-related security breach.
However, while cyber insurance is a crucial type of business insurance, it should never be an organization’s sole method for addressing cyber risks. That’s why, when it comes to obtaining cyber insurance, there are questions that insurance providers ask to verify how a business is taking steps to mitigate cyber incidents. Meeting these requirements will not only determine a business’s eligibility for cyber coverage but also premiums.
Not sure what a business’s requirements are for obtaining cyber insurance? Fear not; we’re here to help. Here’s a look at five cyber insurance requirements and how your business can ensure they are addressed.
1: Comprehensive network security measures
Most insurance providers will want proof that your business has network security measures and procedures in place — and the more robust, the better. While having comprehensive network security protocols in place can be advantageous for cyber insurance premiums, it’s also just good practice from a cybersecurity perspective.
Insurers will want to know how your business proactively addresses network security and may ask about data encryption, data storage, cloud platforms, detection, access control, compliance with security regulations, and intrusion prevention protocols.
So, how can you ensure your business meets this cyber insurance requirement? Start by ensuring that you’re using multifactor authentication (MFA) — also known as two-factor authentication — across your organization. MFA is an easy-to-implement security measure to prevent unauthorized access to accounts. That means that even if a cybercriminal had an account password, with MFA activated they would need the second authentication source to gain access to the account.
Other network security measures every business can benefit from include:
- Strong password policies — all the better if you’re using a password management program.
- Using a firewall
- Implementing endpoint detection and response (EDR) tools
- Reducing unnecessary employee access data (not everyone needs access to everything)
2: Regular security assessments and audits
You can’t plan for what you don’t know about, so cybersecurity assessments and audits are crucial for identifying security gaps that could jeopardize your business.
Cybersecurity assessments enable businesses to better understand their potential risks and spot vulnerabilities so they can take the necessary steps to control, avoid, reduce, and mitigate cyber-related threats. The two main factors in assessing cyber risks are determining the risk’s probability and weighing the event’s impact if it does occur.
Security audits, which differ from assessments and can be conducted internally or externally, verify that specific security measures are in place and ensure that a business complies with regulations.
Keep in mind that an essential aspect of security assessments and audits is that they are ongoing processes that must be conducted regularly to be effective.
For more detailed information on assessing cybersecurity risks, check out our guide on cybersecurity risk management for businesses.
3: Incident response plan
Yes, cyber insurance helps with the aftermath of a cyber incident, but it can’t be your only response mechanism. Since cyberattacks and data breaches are now constant threats that all businesses have to deal with, having a response and recovery strategy is just as crucial as a security plan.
A cyber incident response plan is a written set of instructions that outlines what steps your business needs to take when a cyber incident occurs. The plan should assign responsibilities to specific teams or individuals, and contain all the necessary steps your business needs to take to make the recovery process less stressful and tedious.
The goal of an incident response plan is to minimize a cyber incident’s duration and potential impact. The core steps of a cyber response plan checklist include:
- Identification: Identify the incident.
- Containment: Contain the compromised systems and networks to limit the spread.
- Eradication: Remove all infected files and replace hardware or software as required.
- Recovery: Restore your network and system to its pre-incident state. Confirm that your network is ready for operations to return to normal.
- Lessons learned: Discuss with your team what could have been done better, what errors were made, and how to avoid similar incidents in the future.
An incident response plan should also include a communications strategy and outline who needs to be notified about the matter (such as regulatory agencies and clients) and when.
When shopping for cyber insurance, be prepared to answer questions about your incident response plan, such as how often the plan is reviewed and tested.
4: Employee training and awareness programs
Did you know that your employees are your main internal cybersecurity risk? In fact, according to the World Economic Forum, 95% of all cybersecurity issues occur due to human error. So it’s no wonder that employee cybersecurity training and awareness programs are typically a cyber insurance requirement.
One of the main reasons that businesses become victims of social engineering schemes is that employees simply don’t know what to look for. But remember that employee cybersecurity awareness training can’t be a one-and-done situation. It needs to be a constant presence that is regularly revisited, especially if you have a hybrid or remote workforce.
In a nutshell: Creating a culture of cybersecurity awareness is essential for any business’s success.
Regular cybersecurity awareness training and testing every four to six months will help ensure that workers know how to spot suspicious activity — and how to report it. You can expect insurance providers to ask how often your employees receive cyber awareness training, especially since research has shown that cybersecurity training can reduce the risk of a security breach by more than 70%.
Of course, not all of us are IT experts. Suppose you run a dog grooming business or a craft brewery. In that case, you may not have the expertise to adequately train your staff on cybersecurity. That’s perfectly understandable. Fortunately, you don’t have to worry about doing it on your own. There are plenty of cybersecurity agencies that can facilitate routine workplace training and ensure you have cybersecurity best practices in place.
5: Data encryption and backup procedures
Robust data encryption and backup procedures can make all the difference in how well your business recovers (or doesn’t) from a cyber incident, which is why they are often a major cyber insurance requirement.
Redundancy is vital with backup procedures. A single backup isn’t enough to protect your business when a cyber incident strikes. If a cybercriminal accesses your network and erases your entire customer database, the repercussions could be catastrophic for your business if that information isn’t backed up. Make sure to update your backups regularly and store at least one copy of your database encrypted on a cloud storage platform.
With encryption, the good news is that most web-based email platforms and cloud storage providers already use encryption, so there’s likely nothing you need to do regarding encryption for these services (though it’s always best to double-check if you aren’t absolutely sure). But if you’re not doing so already, you might consider using file encryption, which protects individual files by encrypting them with a unique key. There are many third-party file encryption software options available.
The bottom line on cyber insurance requirements
While cyber insurance provides essential coverage for businesses, it is not a replacement for solid cybersecurity practices. And cyber insurance requirements are essentially a “best of” list of cyber procedures that all businesses should follow.
Implementing these requirements will not only enable your business to obtain a cyber liability insurance policy, but also elevate its overall “cyber hygiene” to mitigate exposure to cybersecurity threats. Plus, keeping a focus on cyber hygiene will help keep cyber insurance costs down.
Simply put: Good cyber hygiene is good for business. Make sure to excel in these 5 cyber insurance requirements, and you’ll be set up for success.
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