Cyber insurance, also known as ‘cyber liability insurance,’ is a type of insurance coverage designed to protect businesses from the potential losses and damages resulting from a cyber attack or data breach.
With the increasing prevalence of cyber threats in today’s digital landscape, cyber insurance has become a vital component of risk management for Australian businesses, as it provides financial protection by covering various costs associated with cyber incidents – including investigation expenses, legal fees, notification costs, and more.
Let’s explore the intricacies of cyber insurance and how it can safeguard your business against the ever-evolving threat of cyber attacks.
What is a Cyber Attack?
To understand what cyber insurance is, we must first unpack what a cyber attack is.
A ‘cyber attack’ is a malicious attempt to breach the security measures of a computer system, network, or digital device. It is often carried out with the intent to steal, alter or destroy sensitive information, disrupt operations, or achieve other unlawful objectives.
The motives behind cyber attacks vary and can include financial gain, political agendas, espionage, sabotage, or simply to cause disruption.
Cyber attackers aim to exploit vulnerabilities in software, hardware, or human behaviour, to infiltrate systems. Such attacks can take many forms, ranging from relatively simple tactics – such as phishing emails and malware infections – to sophisticated techniques, such as ransomware, distributed denial-of-service (DDoS) attacks, and advanced persistent threats (APTs).
As technology continues to advance, cyber attacks have become increasingly prevalent and sophisticated, posing significant risks to individuals, businesses, governments, or any entity with an online presence.
Due to the increasing rise of digital technologies in the workforce, Australian businesses are constantly exposed to cyber threats.
Who Can Be Hacked?
From individuals to multinational corporations, any system in the world can be hacked. Even Tesla was hacked by a 19-year-old tech security specialist in 2022.
While there are various measures businesses can (and should) put in place to prevent a cyber attack, there’s always a risk that those systems don’t hold up.
A successful cyber attack can result in data breaches, business interruption, cyber extortion, legal fees, identity theft and a whole range of other associated risks and costs – so protection is crucial.
Can You Prepare for a Cyber Attack?
Yes, you can absolutely prepare for a cyber attack.
There are many steps you can put in place to reduce your risk profile, such as ensuring your business has good password security, keeping your software and operating systems up-to-date with the latest security patches, and regularly backing up your data.
Tested backups are crucial, as they ensure that critical data can be successfully recovered in the event of a cyber attack. However, there is no magic bullet that can completely prevent a cyber security breach.
How, therefore, do businesses minimise their financial losses in the event of an attack? Through cyber insurance.
What is Cyber Insurance?
Cyber insurance is a type of insurance policy that provides financial protection against losses and damages resulting from a cyber attack or data breach. It typically covers expenses related to investigation, recovery, and liability.
Cyber insurance is also commonly referred to as ‘cyber security insurance,’ ‘cyber liability insurance,’ ‘cyber risk insurance,’ and ‘cyber crime insurance.’
A reliable cyber insurance policy can help a business to mitigate the financial loss and reputational damage associated with a cyber security breach. In addition to covering the direct costs associated with a cyber incident (such as forensic investigations, data recovery, and legal fees), cyber insurance can also cover indirect expenses, such as downtime and loss of income.
Some policies can also cover IT system failures that are not necessarily caused by a cyber attack.
What Does Cyber Insurance Cover? And What are the Benefits?
Two questions we find commonly asked are ‘what does cyber insurance cover?’ and ‘what are the benefits of cyber insurance?’
A business cyber insurance policy can cover a range of expenses related to a cyber incident in your organisation. Possible inclusions and benefits of cyber insurance policies include:
- Business interruption cover: Compensation for income lost and operational expenses incurred during downtime caused by a cyber attack.
- IT repair and restoration costs: How much would it cost to repair, recover and restore your IT systems after an attack? Cyber security insurance can help cover IT repair costs – plus the money spent restoring your lost data.
- Public relations (PR) costs: A cyber insurance policy can assist you with the PR expenses associated with mitigating reputational damage.
- Legal costs: From sensitive data issues to lost data, legal assistance is often required.
- Incident response costs: Investigation costs, customer notification expenses, and credit monitoring services for affected individuals.
- Scams, fraud and phishing: Cover for the money you, or your staff, are tricked into paying.
- Third-party liability: Should a cyber attack result in the theft of personal data belonging to your customers, you may have to compensate them – and your cyber insurance policy can help cover this.
- Cyber extortion: including ransomware attacks, where funds are needed to regain access to encrypted data, or prevent its release.
It’s important to consider the specifics of your business and seek professional advice on what your business cyber insurance policy should cover, to ensure your unique needs are met and you are adequately covered.
Cyber Insurance for Australian Businesses
Can your business afford not to have cyber insurance? This is a good question to ask when weighing up the costs vs. benefits of a cyber insurance policy.
Cyber incidents are on the rise, mainly because – more than ever – most of us depend on technology and the internet.
Many small business owners mistakenly believe that cyber criminals only target large organisations. However, cyber criminals take advantage of that very line of thought by attacking small to medium-sized businesses, knowing that they’re less likely to have reasonable protections in place.
For example, in America, Verizon’s 2021 Data Breach Investigations Report found that 82% of ransomware attacks were against companies with fewer than 1,000 employees.
The key takeaway is that smaller businesses shouldn’t fall victim to a false sense of security that cyber threats are only problematic for large organisations. Cyber liability insurance is an important consideration for all businesses, no matter their size or industry.
From multinational corporations to small startups, every organisation faces cyber risks on a daily basis. By investing in cyber insurance, you can minimise the financial impact of a cyber incident and ensure continuity of operations in the face of unexpected threats.
Protect Your Business Today
Are the up-front costs preventing your business from investing in business cyber insurance?
At Ledge Finance, our suite of business financing services includes insurance premium funding (IPF). IPF is a simple, cost-effective method that enables you to pay your annual insurance premiums with a flexible repayment plan.
This approach allows you to spread the cost of your cyber insurance premiums over a specified period, easing the financial burden and providing greater flexibility in managing your cash flow. With IPF, you can enjoy the benefits of cyber insurance coverage without the strain of a large upfront payment.
Speak with your insurance broker and contact our team for personalised advice on how we can assist with your business cyber insurance premiums, to help protect your business.
