The Product
It is an insurance product like every other insurance policy, that is brought by businesses to protect themselves from risks associated with Internet and information technology. Such risks are not covered under commercial liability policies and that's why, the need of such an insurance comes into image. It provides cover for losses due to hacking, refusal of service attacks, destruction or loss of data, and so on. Protective measures like anti-spam systems, virus protection, etc., fail at some time in time as they are not 100% foolproof. Following a security breach, businesses need to restore their information techniques, clean up infected files, etc., due to which they fail to do their business for quite a while. All this calls for a lot of expenditure in instances when they are not making money. At such instances, this coverage supports them to deal with their financial needs.
Coverage Offered
This insurance product provides coverage for liabilities that may arise due to web content and media, private as well as secure customer information, threat against computer systems and web site, business interruption and recovery of information technology infrastructure. Any loss or financial expenditure occurring because of these events is covered and claim can be designed to make up the losses.
Associated Benefits
First and the most crucial benefit of this insurance is that in case of the security breach, it acts as a funding resource to pay for up the losses and bring back businesses to regular working, without raising the need of government assistance. Next, it evenly distributes the risks among companies by charging high premiums in the ones having higher risk of such instances while getting less from businesses with little risk. Lastly, it indirectly encourages businesses to consider good security measures like tracking website visitors, etc., because companies with poor security systems have to pay higher premiums.
Associated Problems
Despite its benefits, the marketplace of cyber insurance is not picking up significantly. One cause of this is that, insurance companies do not have sufficient actuarial data as the product is recently developed by the insurance industry. Because of the, insurers fail to estimate the amount of premium that must definitely be charged so that, in case of an event, the actual insurer has enough finance for claim settlement. Secondly, insurance companies fear "cyber-hurricanes". This is a term used for situations when excessive number of claims arise as a result of security breach which become difficult to manage by the actual insurer and drains them out completely.
Premium Charged
Such as other insurance products, the premium charged depends on the coverage amount and also the risks involved. Typically, for $1 million coverage, the high quality charged is $3, 500 with a deductible of $5, 000. The quantity of premium charged is higher for business with relatively poor security measures when compared with the ones who are better equipped.
No matter how tough really are a company's security measures, it always has some kind associated with threat. To save themselves from financial crunch during this kind of untoward situations, many companies are now opting for cyber insurance coverage. It is true that this insurance product is an expensive affair nowadays but, it will gradually become simpler and cheaper as increasingly more insurance companies will start offering this product in the marketplace.