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Cyber risk insurance is a type of insurance which safeguards companies and persons working for companies from risk related to cybersecurity.
This is also known as cyber liability insurance coverage (CLIC). Cyber risk insurance is a type of insurance which safeguards companies and persons working for companies from risk related to cybersecurity.
Cyber insurance eliminates the risk of post-attack consequences that are directly related to expense and liability. Depending on the policy, cyber insurance can cover legal costs, expenses, consumer notices, identity theft protection for users, data recovery and computer device repairs.
As cyber risk insurance has its advantages, it also has its downside as it could be useless and a scam.
As Bruce Schneider explains, insurance policies go by “flood and fire” model. Information technology, however, internet activities have no solid dealings therefore do not go by this model. The extent of cyber insurance has been limited by this in order to tune down the problem to the underwriters. Linking the actual loss to the events is faced by the challenge of standards of classifying the event and also there is no concrete proof.
Cyber insurance also does cover when intellectual property is hacked and stolen. This kind of cybercrime could lead to a person losing millions of dollars. This because it is set in a way that it only covers network interruptions, data damages and hacking of the network. Intellectual property cannot be valued as there is no standard of knowing and putting a price on it. Therefore, ensuring it is impossible.
The terms of the cyber-insurance policy can limit the way an entity reacts to a data breach. For example, credit monitoring services which cover the violation of confidential health information, which includes the monitoring of the medical identity of the patient and not the credit of the patient.
Cyber insurance also only covers losses met during the period of network interruption leaving out the full period the business is affected by the interruption. For instance, if there is an interruption on Monday but the business cannot operate throughout that week as a result of the interruption, the policy would only cover Monday, the day of the interruption.
Costs incurred paying the insurance is also high. Compared to what is recovered incase the risk occurs, it is clear that there is losses incurred by insuring itself. This graph above shows the costs of the data breach against cyber insurance spending annually.
