Is Cyber Insurance Necessary?

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Is Cyber Insurance Necessary for SMBs?

If you were to go through the cyberattack data of recent years, the figures might scare you. The FBI states that the number of attacks has tripled since the pandemic, especially due to the work-from-home culture and other related trends.

The frightening fact is that the number of successful attacks has increased even more so, along with the financial loss of a successful data breach. For instance, CNBC reports that cyberattacks cost $200,000 to the business on average. This is a significant loss for most SMBs and even leads to the shutting down of some businesses.

Due to the high risks and costs involved, many business executives wonder if cyber insurance is something useful for them. In this article, we will discuss the concept of cyber insurance and answer the question ‘Is cyber insurance necessary?’

What is Cyber Insurance and Is It Necessary?

Cyber insurance provides liability coverage to businesses in case they get attacked by cybercriminals. It covers multiple aspects of cyberattacks, such as:

  • The cost paid to restore data (such as ransom in case of ransomware)
  • Any fee paid to lawyers
  • Downtime costs
  • Cost of notifying customers

However, before you get happy, there is a lot of finer print that comes with each of these costs. For one thing, different cyber insurance policies are different and the one you choose may or may not cover these things.

Additionally, as we will discuss in the sections to come, there are a lot of important things that cyber insurance does not cover. Additionally, there are some factors that can make one question if cyber insurance is worth it.

Is Cyber Insurance Worth It?

If this question was asked a couple of years ago, then yes, cyber insurance is something that every industry professional would recommend. However, the recent shifts in patterns have led experts to recommend other alternatives, such as bolstering cybersecurity policy.

One of the primary reasons for the downfall of cyber insurance is the increase in premium prices. The increase in the number of cyberattacks has led insurance companies to increase the price of cyber insurance.

In fact, if you compare the cyber insurance premiums of 2022 vs that of 2021, you will find that the price has almost doubled while the coverage has reduced. The rejection rate of cyber insurance policies has also decreased significantly.

Therefore, in 2022 and beyond, cyber insurance may not be worth it and there are some better ways to secure your business interests.

Problems With Cyber Insurance

There are many issues with cyber insurance policies that are not aligned with the interests of Small to Medium Businesses. Some of these issues are:

Rejection of Claim

In case a successful cyberattack occurs, there is a good chance that the cyber insurance company might reject your claim citing your lack of effort to protect your network. This might seem unfair to some, but it is perfectly reasonable considering that most cyberattacks occur because businesses make no effort to protect their system.

For this reason, whether you want to get a cyber insurance policy or not, it is first recommended that you get yourself a cybersecurity consultation. After the consultation, you can get a better idea about your current network security level and the recommendations to fix it.

Fortunately, Tekkis is providing a limited-time free cybersecurity consultation that you can utilize to speak to a leading expert in the cybersecurity field.

Loss of Customers

While cyber insurance might reimburse a business for the ransom it paid to recover its data, the most serious shock comes in the form of customers leaving the business.

Once a cyberattack has occurred successfully, most customers lose faith in a business This results in not only financial losses but also downsizing of the company itself. In fact, many instances have witnessed such a severe loss of customers that the business never opens up again. There is nothing that a cyber insurance policy can do against this risk.

Rise of Premiums

As mentioned earlier, the premiums of cyber insurance policies have straightaway doubled in the last 12 months. This is understandable on part of the insurance companies since there are so many successful attacks and the rising number of claims they have to pay out.

For small to medium businesses, cyber insurance premiums aren’t something they can afford in the budget. This becomes even more of a problem when you factor in that the insurance will not provide any prevention from the attack and that requires some added capital. These preventive steps are unavoidable if you want to make sure your claim doesn’t get rejected in the future.

Is Cyber Insurance a Replacement for Cybersecurity?

Many executives make a blunder when they think that investing in cyber insurance means that they do not have to invest in implementing a cybersecurity policy. However, that is strictly not the case, and doing so can lead to critical losses for your business.

Firstly, you will get the cyber insurance claim only if you have a rock-solid cybersecurity protocol in place. That should be the reason enough to get started with implementing a business-wide security solution for your business. Working on strengthening your cybersecurity is actually cheaper than you think.

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Tekkis Cybersecurity- Leading Cybersecurity Provider

Tekkis Cybersecurity (Tekkis) has been one of the leading cybersecurity providers for small to medium businesses for the better part of the last two decades.

Tekkis does a thorough assessment of the business before coming up with the best-suited action plan. This is very different from the approach that other cybersecurity providers follow, where they provide you with a prebuilt solution that wasn’t created for your requirements.

With prebuilt solutions, you end up paying extra for a lot of services and features you do not really need, while often missing out on certain niche requirements of your business. This is why most executives choose to follow the tailored approach of Tekkis experts.

What Does Tekkis Cybersecurity Coverage Offer?

When you have Tekkis as your IT security provider, you get extensive coverage that includes every aspect of IT security. The inclusions can be modified based on your requirement. Some of what Tekkis offers are:

  • In-depth IT security status review of your business
  • Detailed report with a list of recommendations
  • Network and Endpoint Security
  • Staff Training
  • Custom Software Solutions
  • Premier Expert Support at all times
  • IT audits

Cybersecurity vs Cyber Insurance- Which One Should I Prioritize?

Deciding the priority between cybersecurity and cyber insurance is hardly an argument. Cybersecurity requires a much higher place in your business plans than cyber insurance or any other liability insurance.

In fact, for businesses falling in critical sectors such as Education, Research, Medical, Food, Pharma, etc., cybersecurity today requires more importance than any type of liability insurance.

If your business has a weak cybersecurity plan or no cybersecurity plan at all, getting cyber insurance will not do you any good. In fact, in case of a successful cyberattack, your business might also face penalties from the government due to negligence.

Additionally, cybersecurity measures are preventive in nature and avoid the risk of the attack itself. This lessens the risk of financial losses due to attacks and loss of reputation or clients. However, cyber insurance does not involve any preventive measures.

Verdict

In its essence, cyber insurance is quite a useful tool for businesses to manage the risks of cyberattacks. However, the hikes in premiums and increase in rejection of claims have made cyber insurance unfeasible for most small to medium business (SMB) owners.

Executives are now rearranging their priority list, focussing on improving cybersecurity measures and increasing staff awareness about healthy cybersecurity practices.

In case you are wondering, that is what we recommend to you as well. Create a cybersecurity action plan and forget the worries of insurance premiums or customer losses due to cyberattacks.

Get in touch with us to know more.

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