Despite the potential devastating cost a company may encounter as a result of a data breach, a great deal of U.S. companies do not have insurance coverage for security and data breaches.
According to the 2016 Risk:Value report from NTT Com Security, the majority of global organizations agree that it is crucial for their organization to be insured against information security breaches; meanwhile, less than half (41%) are fully covered for both security breaches and data loss. Additionally, just over a third of those polled report having dedicated cybersecurity insurance.
Of the countries polled, 49% of the U.S. companies surveyed currently do not have insurance specifically for cyber security attacks.
Research among 1,000 non-IT business decision makers in organizations in the UK, US, Germany, France, Sweden, Norway and Switzerland reveals that one in ten (12%) have no insurance cover at all for either eventuality. This is despite most business decision makers admitting that there is an increased cyber security threat, and that the cost of recovering from such an attack could start from around $1 million.
While cyber liability insurance has become increasingly popular and can include cover for data/privacy breaches, extortion liability and network security liability, only 35% of businesses currently see the need to take a policy out, although a further 43% are getting one or thinking about it. Businesses in the U.S. are most likely to have this type of insurance – 51% compared to just 26% in the UK. Notably, wholesale organizations (43%) are most likely to take out dedicated cyber insurance, together with business/professional services (43%) and utilities companies (39%).
Less than half (46%) of those respondents whose organization has company insurance that covers data loss or a breach, expect it to cover legal costs. Fewer expect it to cover regulatory fines (43%), government fines (41%) and remediation (41%). Covering loss of business and loss of IP (intellectual property) is even less likely, according to the report, at just 25%.
When it comes to the validity of insurance cover, half of respondents cite that lack of compliance with necessary security criteria could invalidate their insurance, while 46% feel that not complying with business policies could be a problem, and 43% point to the lack of an incident response plan.
“Faced with risks every day, it’s easy for organizations to look for quick-fix solutions rather than focusing on building a solid security and risk management strategy,” said Garry Sidaway, senior vice president of security strategy & alliances, NTT Com Security. “Rather than relying solely on an insurance policy to cover losses, businesses need a different game plan. Buy insurance by all means, but ensure that you can demonstrate that you have put controls in place to reduce your risks, and what these controls cover – this way you know what is being insured. Being able to demonstrate that these controls are being tested and monitored is essential. Insurers need to know what they are insuring and the controls put in place to protect assets – this is the only way they can agree on cover.”
“Security needs to be embedded into the culture of an organization, from top to bottom, championed by the CEO, designed and executed by the chief information security officer and communicated effectively so that every employee takes responsibility for ensuring that good practices are followed,” Sidaway added.
Cyber insurance is a potentially huge market, and annual gross written premiums are estimated to grow from around $2.5 billion in 2015 to reach $7.5 billion by the end of the decade, according to “Insurance 2020 & beyond: Reaping the dividends of cyber resilience,” a report by PwC.
The NTT Risk:Value report also revealed that only around half (52%) of businesses have a full information security policy, while less than half (49%) have a disaster recovery plan in place.