CYBER INSURANCE

Risk Assessment Guide

Introduction

Does your organization need a cyber insurance risk assessment? There’s no question that cybersecurity rose in our collective consciousness in 2020–largely due to the near-overnight shift to remote work that left many organizations vulnerable to attack. During that time, the FBI’s Internet Crime Complaint Center experienced a 69 percent increase in the number of reports between 2019 and 2020, averaging 2,000 reports every day.

But just because we’ve moved into a new, more sophisticated digital era in the years following this rapid period of transformation, that doesn’t mean we’ve overcome the threat of cyber crimes. The frequency and impact of these attacks have only grown over time: The number of reported phishing attacks jumped by 48 percent in the first half of 2020 alone. However, the total amount of ransomware attacks rose by 41 percent in 2022, all while the cost of the average healthcare data breach climbed to $10.1 million.

Enter cyber insurance coverage: An extra layer of protection designed to protect organizations from the fallout following a data breach or cyber attack.

Why is cyber insurance an increasingly appealing investment? In today’s rapidly evolving information technology (IT) climate, data is more at risk than ever before–and is being used for exploitation and monetary gain. Security-minded organizations are taking proactive steps to ensure they are not left to foot the bill for these kinds of attacks.

With the proper protections in place, organizations can confidently step into our digital age. Here’s what you need to know about cyber insurance, why it’s so important, what steps to take before pursuing this type of coverage, what’s covered and what’s not, as well as determining your level of cyber risk.

How Protected Are You? The Merits of a Cyber Insurance Risk Assessment

Do you know where your organization stands when it comes to cyber risk?

Staying current with emerging security threats can be challenging these days, with cyber criminals finding all kinds of new ways to hack their way into your networks, databases, systems, and websites—not to mention the introduction of AI-powered attacks. But when the result is lost data, hefty ransoms, and costly business interruptions that damage your organization’s reputation, cyber insurance is an essential tool to recover.

Your provider will likely ask you to conduct a cyber insurance risk assessment to illuminate any potential vulnerabilities in your system.

What is a Cyber Insurance Risk Assessment?

A cyber insurance risk assessment is a deep audit of your procedures, solutions, and security strategies to identify risk areas and gaps in your security. It’s not just about the technologies you use to protect your organization–it also examines your protocols, the ways your employees navigate and manage your digital infrastructure, and how all of these pieces come together to create potential security risks that bad actors can exploit. It also evaluates the strength of your cybersecurity plan or written information security program (WISP).

The goal of a cyber insurance risk assessment is threefold:

Why Is a Risk Assessment So Important?

Why do you need a cyber insurance risk assessment? A risk assessment is beneficial for your insurance carrier–but it’s also helpful for you. Your provider will get a deeper understanding of the risk they are underwriting, but it can also offer a clearer picture of all the ways your system might be vulnerable to security breaches. In turn, you can use this information to bolster your security strategies, lower your cyber risk, and potentially even secure a lower premium.

Based on the results of your cyber insurance risk assessment, you can take action to eliminate risk, fortify exposed systems, and reduce the threat of hacks and breaches.

Who conducts the cyber insurance risk assessment?

Christo IT takes the guesswork out of preparing for a cyber insurance policy with our comprehensive cyber insurance risk assessment. We understand navigating this process can feel daunting, so here’s what our process covers.

Our assessment involves an interview with your organization that includes 191 policy and procedures questions. We start by identifying all the assets, including things like servers, hardware, software, endpoints, and any cloud-based systems.

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The next step involves assigning each of these assets a value based on how your organization leverages them to weigh the role they play in your operations. Only then will we begin to evaluate the risk of each asset.

One of these cyber risk assessment tools is a vulnerability scan, which seeks to uncover security flaws in your software and network. It’s a detailed inspection of your devices, communication equipment, networks, and infrastructure to find weaknesses in your IT security. It also examines all of your active countermeasures to evaluate just how well they can combat potential threats.

Vulnerability assessment tools may include:

Web application scanners scan and monitor your web-based applications for loopholes and openings that can allow bad actors to make their way into your network.
Network scanners monitor your network for hidden or unrecognized IP addresses.
Protocol scanners respond to the actions of cyber criminals by monitoring the actions of your network hosts and IP addresses.

After assessing the risk of your entire digital ecosystem, we will share the results, giving you detailed information regarding any vulnerabilities or areas of concern.

What is Cyber Insurance?

The FBI’s Internet Crime Complaint Center (IC3) logged 800,944 total complaints in 2022, accounting for $10.3 billion in losses–a 49 percent jump in total losses from cyber incidents over the previous year.

While we may not be seeing as many headlines about cybercrime as we were during the early months of the COVID-19 pandemic, these threats have only continued to grow in frequency and cost, which is why many professionals are looking for ways to protect their organizations from cyber risk.

What exactly is cyber risk? Cyber risk is the probability that criminal actors will exploit an organization’s dependency on their digital resources.

Cyber insurance, then, is designed to protect these organizations from the fallout from this risk, from the losses that come after a digital attack. It acts as insulation to safeguard companies from the financial toll that cyber attacks can take, including incident recovery costs, legal fees, and more. In the event of a security breach, data theft, or cyber attack, cyber insurance can be an indispensable part of your IT disaster recovery plan.

In return, cyber insurance providers require the organizations they protect to do their due diligence and fulfill certain security requirements. These requirements don’t just check a box, though; they are useful tools to help organizations develop a strong cybersecurity strategy, reduce the risk of attack, and mitigate the overall impact of an incident like a data breach or cyber attack.

What is Cyber Risk?

Organizations that store sensitive data online: This includes client, patient, and customer data like personally identifiable information, financial data, Social Security numbers, and Protected Health Information (PHI). This also includes data protected by the Health Insurance Portability and Accountability Act (HIPAA). This is not exclusive to healthcare providers but actually includes anyone who handles HIPAA-protected data, including attorneys and legal firms, as well as certified public accountants and accounting firms.

Businesses with long client lists or expansive customer bases: Because many laws require organizations to notify customers after a data breach, the cost to inform a large client database of this kind of incident can add up quickly. Insurance can help cover not just the cost of regulatory fines but also the cost of the actions you must take after a breach.

High-revenue organizations and those with valuable digital assets: Because of the nature of their work, some organizations are more likely to have more valuable data–which also makes these organizations more appealing to cyber criminals.

In all actuality, businesses of every size can benefit from cyber insurance–even small- and medium-sized businesses (SMBs), which are more at risk now than ever. While it’s true that cyber incidents targeting large organizations are the ones that make headlines, SMBs are a prime target for bad actors, largely because they do not always have access to the same kinds of cybersecurity resources or protections that large or multinational corporations can afford.

Cyber insurance is ultimately for every organization looking to stay prepared for cyber attacks, identify and address potential vulnerabilities, and gain peace of mind from knowing there is a support system to handle moments of crisis.

Cyber Insurance: What Exactly Is Covered?

Businesses of all sizes can benefit from the protections that come with a strong cyber insurance policy. While every plan is different, cyber insurance is designed to help recover after an attack by easing its financial impact. Coverage usually protects against things like:

Data breaches and other malicious threats
Digital extortion, viruses, malware, and website hacks
Cyber fraud
Cyber attacks against your organization, your vendors, and other third parties
Attacks within your own network
Attacks outside your network that impact your business operations or jeopardize the security of your data
State-sponsored attacks

But what is covered in one of these attacks? Cyber insurance can help with things like:

Legal counsel and guidance, as well as defense in a lawsuit or regulatory investigation
Reputational damage
Recovery of stolen data
Breach confinement to limit the spread of an attack and prevent further intrusions
Notifying customers and clients regarding the details of the breach or incident
Recouping lost revenue resulting from business interruption
Hiring crisis management or public relations professionals
Paying fees, fines, and penalties
Conducting investigations to discover how a breach or attack started

Cyber insurance will also cover things like third-party indemnification. This means that if stolen data, malware, or another incident affects other entities, the insurance provider will pay for these damages on your behalf.

Notifying impacted parties immediately about a data breach of compromised information is especially important because clients and customers will be at heightened risk of identity theft. These parties must quickly communicate with banks, credit reporting agencies, and other government agencies to protect their data. This can mean communicating with many people as fast as possible, which can come with its own steep costs.

Another important protection from cyber insurance is network security audit coverage. This coverage is designed to help spot potential vulnerabilities–things like installing patches and updating software. Cyber insurance may also cover credit monitoring services for cases involving the breach of sensitive data or personally identifiable information.

As with other kinds of insurance coverage, there are limits to what protections cyber insurance offers. Cyber insurance does not include things like:

Is Cyber Insurance Worth It?

In a word, yes–in most cases.

Today, the overwhelming majority of businesses rely on digital content in one way or another. When that digital content is sensitive–as is the case with financial, legal, and health-related data–it is especially appealing to bad actors. This increases the risk of an attack and makes security that much more essential.

Cyber insurance coverage can be just the thing to guard against breaches and attacks and the subsequent effects. Especially if your operations depend on the continued operation of your network and digital infrastructure, you might not be able to perform business-critical functions without restorative support.

Here’s something to keep in mind: If your company is hacked and you don’t have coverage, you’ll end up paying for restoration, backup, and crisis management completely out of pocket–which can add up quickly. It’s likely much cheaper to pay for the insurance policy. You may be forced to pay for significant losses through your capital.

It’s also important to remember that cyber insurance bridges some coverage gaps that other forms of insurance do not cover. In most cases, business liability policies aren’t enough after a breach or attack.

Consider this: Sixty percent of small businesses close within six months of a cyber attack. Why? Because they just don’t have the resources to recover the way they need to. The average cost of a data breach is $3.62 million–and many organizations can’t overcome these kinds of losses. When you factor in the reputational damage (which can be mitigated with the help of a PR or crisis management team) and business interruptions, it’s no wonder so many organizations are forced to shutter after an attack.

Cyber insurance makes it far easier to make a full recovery and come back stronger than ever. Plus, the cyber insurance requirements many providers have in place as a provision of coverage are far from arbitrary–they strengthen your defenses to help ward off attacks.

Prepared for Anything: A Cyber Insurance Coverage Checklist

Cyber insurance providers are there to protect your operations, but they want to protect their interests as a business, too. That’s why they often have a set list of requirements before they can provide coverage.

The benefit of these requirements? They strengthen your protection against cyber risk. Security-minded organizations may already have some–or all–of these protocols in place to protect their digital infrastructure from end to end. When pursuing cyber insurance coverage, it’s important to keep in mind that most providers will want to see that you have certain security measures set up, including the following cybersecurity protections:

Multi-factor authentication, which allows users to validate their credentials with a username and password, as well as some other factor like a one-time code sent via email or text or a biometric key like facial recognition or a fingerprint. Why your staff should be using multi-factor authentication
Cybersecurity training to empower your team to protect your network against preventable threats like phishing emails and other human error-related misconfigurations.
Written information security program, or WISP, is also called a cybersecurity plan and refers to a coordinated set of documented policies and procedures that outline your organization's strategy to protect against, detect, and respond to IT security threats and data breaches. An effective program clearly defines information security roles and responsibilities for all staff, implements training on threats and best practices, sets policies for technology usage and online conduct, and details incident response plans and countermeasures in the event of an attack.
Regular data backups, which are essential to rally after an attack and can make all the difference between a total loss of your organization’s data and a complete recovery. Backups may be stored both on-premises and off-site, but they should be stored separately from where the primary network data is stored.
Endpoint protection (EDR/XDR), which breaks down information silos to gain a comprehensive, holistic view of threats across the entire infrastructure. The Extended Detection Response system automates threat detection, investigation, and response, dramatically reducing time to detect and to respond.
Zero trust shifts away from implicitly trusting everything inside your network and instead assumes a breach has likely already occurred internally It verifies identity and grants least privileged access to resources by enforcing real-time security policies based on all available signals, effectively minimizing risk exposure.
Identity access management, which is sometimes shortened to IAM, focuses on limiting user access to only the data they need to do their work. It means managing digital identities so that not every user has access to the entire network. In the event of a hacked account or disgruntled employee, IAM prevents malicious actors from gaining keys to the entire kingdom.
Change management speeds up deployments by documenting processes for future reuse, provides audit trails to demonstrate security compliance, and enables IT teams to quickly roll back problematic changes. It also facilitates cross-departmental coordination through meetings to minimize business disruption from new system implementations.
Data classification enforcement is much like IAM and ensures each user only has access to the data and systems necessary to do their work, segmenting data, software, and individual aspects of your digital infrastructure based on the principle of least privilege to keep systems secure.

Cyber Insurance Risk Assessment FAQs

What is Cyber Liability Insurance?

Cyber Liability Insurance is a type of insurance coverage designed to protect businesses and organizations from financial losses and liabilities associated with cybersecurity breaches and data incidents. As the frequency and severity of cyber threats continue to rise, Cyber Liability Insurance has become increasingly important for businesses to manage the risks associated with storing and processing sensitive information.

How Much Cyber Insurance Do I Need?

Determining how much Cyber Insurance your organization needs involves a careful assessment of various factors related to your business, its digital assets, and potential cyber risks. There isn't a one-size-fits-all answer, as the appropriate coverage will depend on your specific circumstances.

Who Needs Cyber Insurance?

Cyber Insurance is relevant and beneficial for a wide range of businesses and organizations, regardless of their size or industry. As cyber threats continue to evolve and the frequency of cyberattacks increases, any entity that uses digital technology, stores sensitive information, or conducts business online can benefit from Cyber Insurance.

Ready for Cyber Insurance? Ensure you meet the 5 key requirements. Request your cyber policy review today!

At Christo IT, our mission is to provide modern, realistic cybersecurity strategies–especially to professionals who handle sensitive, confidential, or regulated data, including healthcare providers, legal firms, and financial services firms in the greater Philadelphia area.

This means taking proactive steps like:

Developing custom cybersecurity and disaster recovery plans–including cyber insurance coverage
Empowering your team with the best cybersecurity practices and guidance regarding the latest social engineering attacks
Strengthening your network and data storage practices and helping you meet industry-specific compliance requirements
Leading the charge on endpoint detection and response
Managing authentication authorizations and network and data access controls
Dealing with outages, threats, and other IT disaster recovery needs