What is cyber insurance and how does it benefit MSPs?
In today’s threat landscape, it is essential for companies to have a good cybersecurity strategy that is supported by cyber liability insurance.
The global average cost of a data breach now reaches $4.45 million, according to IBM data. However, a 2022 survey highlights that only 19% of companies state that their insurance covers more than six hundred thousand dollars.
Despite its appeal to both insurers and customers, these figures indicate the challenges the cyber insurance industry is facing. However, the benefits it delivers clearly go beyond financial protection as insurance can act as a useful ally for businesses in the event of a cyberattack. The escalation we have seen in supply chain and watering hole attacks, for instance, has made third-party cyber insurance coverage essential for any company and MSPs that wish to maintain a good relationship with their customers and suppliers when a data breach occurs. But it is also true that understanding how insurance works, what it protects and what it doesn't, can be confusing. Underwriting has become a complex task as it is hard to quantify cyber risk in exact terms, which means insurers now require compliance with strict cybersecurity criteria to reduce their own liability.
What is cyber insurance?
Cyber insurance is a policy that provides certain coverage for the potential impact, both reputational and financial, of a business interruption resulting from the effects of a cyberattack.
However, understanding cyber insurance in the current context can be complicated. To figure it out in the best possible way, you first need to understand the different coverage options that exist.
- First-party insurance: covers a company against cyberattacks or breaches and reduces the financial burden associated with an event, thus protecting an individual company.
- Third-party insurance: covers companies in the event of third-party claims. In this sense, it would pay for legal and court fees, settlements, and court judgments, as well as fines for non-compliance.
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5 benefits of having cyber insurance
For MSPs, holding a cyber insurance policy is crucial, as they have access to confidential customer data that they must safeguard. Businesses that opt for cyber insurance reap the following benefits:
1- Reputation management:
A cyberattack can damage a company's reputation as well as erode customer confidence and have a negative impact on new business opportunities. Cyber insurance policies often include reputation management services to help mitigate non-financial impacts and serve as public relations support for the affected company by minimizing damage and restoring the company's reputation.
2- Legal support:
This support service can help businesses understand regulatory obligations, such as data breach notification requirements, and assist in developing an effective strategy for responding to fines or other legal issues.
3- Business continuity support:
Many policies include assistance in developing a plan for business continuity in the event of a security breach. This includes switching to backup systems for data recovery, as well as restoring data and systems and resuming normal operations.
4- Forensic investigation and civil liability expenses:
This type of policy can cover compensation to third parties affected by a security breach, as well as legal costs, while covering the costs of hiring experts to investigate the incident.
5- Employee training:
Cyber insurance policies also often include access to training programs to help employees understand the risks associated with cyber threats, as well as providing instructions on how to prevent them, seeking to reduce the risk of a cyberattack.
How to choose the right policy for your MSP business
Understanding cyber insurance requirements can be complicated. Needs often vary greatly, depending on the size, type of company, industry, and level of risk associated with its infrastructure. Here are some of the main conditions to consider when taking out cyber insurance:
- Specific coverage: confirm that the policy offers adequate and appropriate coverage for the specific risks your company faces, as these needs may vary from one company to another.
- Legal and regulatory compliance: it is imperative to ensure that cyber insurance complies with the legal requirements governing the company and the industry it operates in.
- Adequate coverage limits: check that the limits covering potential financial damages in the event of a cyberattack cover costs sufficiently.
- Exclusions and limitations: any policy exclusions and limits should be reviewed carefully to understand which acts or types of incidents are not covered.
To avoid confusion, small and midsize companies can rely on MSPs to advise them on the right insurance coverage for their business and provide guidance on how to comply with insurers’ requirements when applying for a policy.
Calvin Engen, CTO of WatchGuard partner F12.net, explains the situation: "We’re seeing that small and medium-sized businesses are finding it more difficult to obtain cyber insurance. Customers are asking why and are looking for trusted advisors to help them understand what they need to do. Implementing more controls and solutions are key to getting the right level of cyber insurance. The advantage we have is that we’re already talking about these types of solutions, so SMBs have us in mind when they need these services."
