Today’s small businesses face the same cyber threats as large corporations, but without the luxury of expansive IT teams or top-tier technology solutions. This creates a dangerous situation. Without the infrastructure to effectively address modern threats, it’s not a matter of if a cyber-attack strikes. It’s a matter of when.
Because of this, disaster recovery and business continuity have become a core component of every cyber security plan. Businesses are realising that, in order to truly protect themselves, they must prepare for every outcome. One measure being adopted to achieve this is cyber insurance. But is such a large step actually necessary? Or are they wasting their money?
What is Cyber Insurance?
Cyber insurance (sometimes referred to as cyber liability insurance or cyber risk insurance) is a specialised policy designed to protect businesses from the financial consequences of a cyber-attack. This could include a data breach, hacked account, malware, business email compromise, or any other threat that causes harm to the business. Unlike traditional business insurance, which covers more general concerns, cyber insurance is specifically built to address digital threats.
What Does Cyber Insurance Cover?
Cyber insurance coverage varies by policy, but most policies will include at least some of the following:
- Post-Mortems: Costs associated with forensic investigation to determine the cause of a cyber-attack.
- Data Recovery: The cost of recovering or replacing lost data, through whichever means are required.
- Business Interruption: Some expenses caused by threat-related downtime may be covered.
- Legal Fees: The expenses incurred by legal advice and regulatory penalties.
- Cyber Extortion: While not offered by every insurer, some will help cover the cost of ransomware payments or negotiation services.
Do You Need Cyber Insurance?
Generally, it is always better to be overinsured than underinsured. However, due to tight budgets, this isn’t realistic for every business. Some simply won’t have the resources available to support such an investment, when those funds might be required elsewhere. Before committing, ask yourself:
- Does my business store sensitive data?
- Am I in a highly-regulated or particularly vulnerable industry?
- How strong are my current defences?
- Am I fully compliant with relevant regulations?
- What is my IT budget and internal staffing capacity?
- Could I afford the consequences of a cyber-attack without help?
If your business is at a high level of risk, or is unprepared to effectively manage the costs associated with an attack, cyber insurance is a necessary investment to protect your financial future.
Choosing Cyber Insurance in Australia: What to Look For
When selecting your policy, focus on these key areas:
- Scope: Ensure the policy addresses your unique risk factors and financial needs.
- Exclusions and Limits: Exclusions are scenarios or specific costs that your insurer will not cover. Limits represent the highest amount that they are willing to spend. Check both carefully.
- Terms and Conditions: There are usually certain conditions that you must abide by in order to maintain coverage. Make sure you understand these.
- Communication: Your provider should provide clear, transparent communication at all times. If they cannot manage this under normal circumstances, getting coverage will be difficult during an emergency.
- Premiums: A premium is the monthly fee you pay to maintain coverage. Ensure that this fits within your budget. Watch for any hidden terms that could increase your premium over time.
If all of these look good, and the contract is acceptable to both parties, then go ahead and sign. If you see any warning signs, it might be worth choosing a different provider.
FAQs
Is Cyber Insurance Mandatory for Australian Businesses?
No, cyber insurance is not legally required in Australia. However, some policies can help cover legal costs associated with regulatory noncompliance. Insurance also demonstrates your commitment to security, which is looked on favourably.
Does Cyber Insurance Cover Human Error?
Cyber insurance does not cover human error specifically. It is only designed to cover the consequences of a cyber-attack.
Can I Get Coverage if I’ve Already Been Breached Before?
Yes. But depending on the circumstances, you may face increased premiums or additional conditions if the insurer considers your business particularly high-risk.
How Much Does Cyber Insurance Cost?
Premiums vary widely based on a number of factors, such as your risk level, chosen provider, and business size. Always ask for a direct quote if you’re uncertain. You can keep premiums as low as possible by implementing and documenting basic security measures, such as staff awareness training, as these lower your risk level.
Reduce Your Risk and Ensure Financial Success
Attacks are inevitable – but how you recover from them makes all the difference. Cyber insurance is an important safety net for businesses who need additional resilience against cyber threats. By choosing the right plan and supporting it with strong security measures, you put your business in a much better position to survive and thrive after a cyber incident.
Worried about cyber threats? National IT can help you identify your biggest risk factors, providing actionable insights that will allow you to address them early. Get an audit and learn how to protect your business today.