In 2018, cybercrimes caused 45 billion US dollars worth of damages worldwide. To put that into perspective: in the same year, all global natural disasters combined generated damages of 140 billion dollars. It is therefore hardly surprising that, in recent years, insurance companies have jumped on the cyber security train in the form of “cyber insurance”.
Their policies promise to cover damages caused by hacker attacks or any other IT-related operational failures.
However, for actual payments in the event of damages to be made, there is a long chain of measures in between that must first be cleared. Before a policy is issued, the insurance company performs an examination of the current situation, a so-called “risk analysis”.
During risk analysis, the insurance company will determine, in advance, which measures the company seeking insurance has previously taken to minimize any possible risks. The outcome of the risk analysis significantly affects the form of the policy.
In the best case, the premium for the insured company will be dropped because certain damage scenarios are ruled out or because the likelihood of occurrence has been marked as reduced. In the worst case, the insurance company will exclude certain aspects from the insurance coverage. Once everything is sorted, the policy can be effected.
Study garners attention
For many businesses, cyber insurance presents a potentially great solution. However, a study conducted by commercial property insurance company FM Global shows that protection in the form of insurance is far from ideal. In the study, more than 100 CFOs or other financial managers (in companies with a minimum turnover of one billion US dollars) were questioned.
One issue covered was the question of what types of problems are not usually covered by cyber insurance in the event of damages. Here are the most relevant issues that were identified:
- Brand or reputation suffer damage
- Investors implement stricter controls
- Decline in sales
- Compliance issues
- Loss of market shares
- Stock price falls