As new risks arise, so do new insurance markets and opportunities. Until recently, all the gains for insurers were in the physical world. But now, the insurance industry is increasingly entering into cyberspace.
As cybercrime continues to rise, so does the cost to business: in money, data and increasingly (in a post-Cambridge Analytica world) customers.
The estimated annual cost of cybercrime globally has been estimated to be around $600 billion. This can include malware, data theft or even conventional crimes taking place online (such as money laundering).
Single incidents can lead to a company going out of business: 60 percent of companies that were a victim of a cyberattack go out of business within six months due to “clean up” costs. Even mere cloud disruptions could lead to costs of up to $121 billion, according to a Lloyd’s report.
Cybercrime can even take entire countries offline. In 2016, a British hacker attacked a Liberian telecommunications company at the request of a person working for a competitor. He developed a bot that fired off so many data requests the telecom’s systems crashed, and the sheer amount of internet traffic caused Liberia’s entire internet system to go offline.
While businesses have been aware of cybersecurity as a threat, they have been slow to take action. But not anymore. There is no shortage of cybersecurity firms (there is now even a specific Cybersecurity ETF on the ASX) – however they may not always be successful in protecting their clients from harm.
With this in mind, businesses are seeking insurance against cyberattacks to minimise the negative impact of cybercrime. The insurance companies with the best prospects of success will combine existing experience in the insurance market with experience in cybersecurity.
Its cyber insurance offering is available in the UK through its Ensurance UK arm. After some years specialising in construction and engineering insurance, Ensurance announced the launch of its new policy in November 2018.
And would-be clients don’t have to be in the construction business to qualify. It will be targeted at business that handles customer data. Naturally many of its existing clients will qualify, although they are hoping to attract some new clients and broaden their target market.
Executive Chairman, Tony Leibowitz said: “This is the first of a number of new lines of business the company hopes to enter, as the management team looks for opportunities to broaden our customer base and offer specialist insurance products in emerging risks and underserved markets.”
Because the market is still relatively nascent, it does not yet provide the extent of insurance coverage that buyers would like, and many insurers are experiencing difficulty in deducing clients’ “cyber-health” as much as the clients, due to a lack of tools.
What gives Ensurance its competitive edge in cyber insurance is its access to a team of cyber breach professionals that will support policyholders at all stages of the breach response.
The cover will include first and third-party liability, data protection loss, cyber extortion, forensics expertise, reputational risk management and business interruption resulting from security breaches and system failures.
The product is not yet available in Australia, but with 30 percent of businesses in Australia experiencing a cyberattack in 2016 there is likely to be an equally high demand domestically.
It is also worth noting that most cybercrimes are caused by human error that allows the hacker to gain access – so even with the best systems and protection in place, there is no eliminating the possibility of a cyberattack. The best solution for a business would be to protect themselves against the potential damage of one.
Having an insurance policy to protect physical assets has almost become the status quo, and with the rise of cybercrime it is likely to become a key component of any business’s insurance needs.
This content is produced by Star Investing in commercial partnership with Ensurance Limited. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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