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What Cyber Insurance Requirements to Expect
Cyber threats pose a significant risk to businesses of all sizes. Data breaches, ransomware attacks, and other cyber incidents can lead to substantial financial losses, reputational damage, and legal liabilities. To mitigate these risks, many companies are turning to cyber insurance as a critical component of their overall cybersecurity strategy. This especially applies to tech companies whose products and services heavily rely on digital footprint.
However, obtaining cyber insurance is not as straightforward as traditional insurance policies such as general liability or workers' comp. Insurers have implemented stringent cyber insurance requirements to ensure that their clients have adequate safeguards in place. As a result, you must not be able to pay for cyber insurance, but you must demonstrate that you have implemented all required cyber risk controls.
In this blog post, we will explore the key cyber insurance compliance requirements you should expect when applying for coverage.
The Importance of Cyber Insurance Compliance
Cyber insurance compliance should not be viewed as a box-ticking exercise. Insurers want to see that you have implemented proper security controls and best practices to minimize the risk of a cyber incident. Failure to meet these requirements can result in higher premiums, limited coverage, or even denial of insurance altogether, which can risk your contractual obligations.
According to a recent survey by Marsh, a global insurance broker, 47% of companies surveyed reported having some form of cyber insurance in 2020, up from 34% in 2017. However, the same survey revealed that 53% of respondents found it challenging to understand what cyber insurance coverage they needed. This highlights the importance of familiarizing yourself with the common cyber insurance requirements to ensure you have the right coverage for your business.
Essential Cyber Insurance Requirements
Security Policies and Procedures
One of the primary cyber insurance requirements is having well-documented security policies and procedures in place. This includes an incident response plan that outlines the steps your organization will take in the event of a cyber incident. Insurers will also look for policies related to data backup and recovery, access control, and employee training on cybersecurity best practices.
If you have a SOC 2 compliance report, you have likely already implemented the required security policies and procedures.
Real-world example: In 2017, Equifax, one of the largest credit reporting agencies, suffered a massive data breach that exposed the personal information of 147 million people. The company had failed to patch a known vulnerability in its software, despite having a policy in place to do so. This incident underscores the importance of not only having security policies but also enforcing them consistently.
Multi-Factor Authentication (MFA)
Multi-factor authentication is a security measure that requires users to provide two or more forms of identification to access a system or application. This typically involves a combination of something you know (e.g., a password), something you have (e.g., a security token), and/or something you are (e.g., biometric data). Many cyber insurance providers now require their clients to implement MFA for all critical systems and remote access points.
According to Microsoft, MFA can block over 99.9% of account compromise attacks. This compelling statistic demonstrates the effectiveness of MFA in preventing unauthorized access and protecting sensitive data.
Endpoint Detection and Response (EDR)
Endpoint detection and response is a cybersecurity solution that continuously monitors and responds to threats on endpoints, such as laptops, smartphones, and servers. EDR tools can detect malicious activity, isolate infected devices, and provide forensic data to investigate and remediate cyber incidents. Insurers increasingly require EDR as part of their cyber insurance requirements to ensure that clients have advanced threat detection capabilities.
Real-world example: In 2020, the University of California, San Francisco (UCSF) suffered a ransomware attack that encrypted several servers within the School of Medicine. Thanks to their EDR solution, UCSF was able to quickly detect and contain the incident, limiting the impact of the attack. However, the university still had to pay a ransom of $1.14 million to recover their data, underscoring the importance of having robust backup and recovery processes in addition to EDR.
Employee Training and Awareness
Human error remains one of the leading causes of cyber incidents, with phishing attacks and weak passwords being common vectors for data breaches. As a result, insurers often require their clients to provide regular cybersecurity training and awareness programs for their employees. This includes educating staff on how to identify and report phishing emails, creating strong passwords, and handling sensitive data securely.
A study by Wombat Security Technologies found that organizations that conducted regular cybersecurity training saw a 70% reduction in risky behaviors, such as clicking on phishing links or sharing sensitive information. This demonstrates the effectiveness of employee education in mitigating cyber risks.
Third-Party Risk Management
Many cyber incidents can be traced back to vulnerabilities in an organization's supply chain or third-party vendors. Insurers will want to see that you have a robust third-party risk management program in place to assess and monitor the security posture of your vendors and partners. This may include requiring vendors to complete security questionnaires, conducting on-site audits, and including cybersecurity requirements in contracts.
Real-world example: In 2013, Target suffered a massive data breach that compromised the credit and debit card information of 40 million customers. The attackers gained access to Target's network through credentials stolen from a third-party HVAC vendor. This incident highlights the importance of vetting and monitoring third-party vendors to ensure they meet your organization's cybersecurity standards.
Navigating the Cyber Insurance Landscape
As the cyber threat landscape continues to evolve, so too do the cyber insurance requirements set by insurers. It is essential to work closely with your insurance broker and cybersecurity team to ensure that your organization meets these requirements and has the appropriate coverage for your risk profile.
When shopping for cyber insurance, be prepared to provide detailed information about your organization's cybersecurity controls, incident response plans, and risk management processes. Insurers will use this information to assess your risk and determine the appropriate coverage and premiums.
It is also important to regularly review and update your cyber insurance policy to ensure that it keeps pace with the changing threat landscape and your organization's evolving needs. This may involve increasing coverage limits, adding new endorsements, or adjusting deductibles based on your risk assessment.
To streamline risk assessment and insurer compliance, companies can use risk management tools such as Koop's ERM Automation, which provides ISO and SOC 2 risk controls to simplify risk control implementation and tracking.
In Conclusion
Cyber insurance is becoming an increasingly important tool for businesses to manage and mitigate the financial impact of cyber incidents. However, obtaining coverage requires meeting stringent cyber insurance compliance requirements set by insurers. By implementing strong security controls, such as MFA, EDR, employee training, and third-party risk management, organizations can demonstrate their commitment to cybersecurity and secure the coverage they need to protect their assets and reputation.
As the saying goes, an ounce of prevention is worth a pound of cure. By investing in robust cybersecurity measures and meeting cyber insurance requirements, businesses can reduce the risk of falling victim to a devastating cyber attack and ensure they have the financial backstop in place to recover if an incident does occur.
