The changing nature of crime
Small-scale, traditional crime is fast becoming a distant memory. People now live in a world where crimes are committed on a global scale, with thousands of businesses, organisations and individuals suffering the devastating effects of cybercrime at once.
This shift was recently highlighted in a report by the National Crime Agency, which revealed that cybercrime rates had officially overtaken traditional crime rates in the UK.
These statistics have largely reflected what we have seen and experienced as a cyber insurance provider. In fact, the increase in claims from UK businesses soared by 78% last year.
Conversely, claims for more traditional forms of crime are in steady decline. Bearing this in mind, businesses need to consider how to best address the rising threat of cybercrime.
What exactly is cyber insurance, and how has the term evolved?
Cyber insurance has actually been around for nearly two decades. Its origins stem from the dot com boom at the turn of the millennium which led to the creation of a variety of new insurance policies to protect online businesses.
In the last few years, the advent of high-profile cyber attacks against traditional businesses has turned cyber insurance from a niche product into a mainstream market.
The main purpose of cyber insurance is to safeguard businesses against the new world of digital and electronic crime. This incorporates attacks ranging from phishing scams and malware infections, to data hacks and cyber extortion.
Much like property insurance protects businesses against loss or damage to their physical assets, cyber insurance protects a company’s intangible assets including company data and sensitive customer information.
As seen recently, cyber attacks can lead to significant financial losses, and there is often a range of unforeseen but necessary expenses following an incident.
>See also: 10 cyber security trends to look out for
Not only can cyber insurance help cover the immediate financial fallout, but it can also help cover the costs of bringing in a number of expert advisors to help manage the aftermath.
This may include calling upon forensic investigators, IT specialists, legal experts, and a PR team. Furthermore, should legal action or a regulatory investigation be brought as a direct result of the incident, insurance can assist with the cost of defending the suit, settling damage awards or managing the investigation.
As more businesses fall victim to cyber-attacks, the number of companies offering this type of insurance is on the increase, with more than 20 insurers now offering this form of cover in the UK.
Nevertheless, adoption rates are still surprisingly low compared to the US. A quarter of US companies purchase standalone cyber policies compared to just 1 in 10 in the UK.
However, with more and more attacks happening each day and new legislation such as the GDPR (General Data Protection Regulation) coming into play, these figures will almost certainly start to change.
Why businesses should consider adopting cyber insurance
CFC dealt with over 400 claims in 2016 alone, with over 20% stemming from electronic crime, and nearly a third coming from data breaches. Whilst the majority of these attacks resulted in no more than £50,000 worth of damage, the potential for cybercrime to cause financial catastrophe is starting to become a reality.
As such, implementing future-proof policies in regards to cybersecurity is becoming a crucial consideration for businesses of all shapes and sizes. This is especially the case when one considers that obtaining a cyber insurance policy is relatively straightforward compared to traditional forms of insurance.
With fewer obligations in terms of risk management and plenty of competition driving premiums down, it has never been easier to purchase the appropriate cyber insurance policy.
One thing is for sure: the large majority of individuals and UK businesses will experience some form of cyber-attack in their lifetimes.
CFC Underwriting therefore advocates combining a strong cyber insurance policy with a sound security and risk management protocol. This approach will best alleviate the damage of a potentially costly cyber incident.
Sourced by Graeme Newman, chief innovation officer, CFC Underwriting