November 5, 2020
Essential Steps for Cyber Insurance
Corporate IT, legal, risk and business leaders must collaborate on three steps before updating or acquiring new cyber coverage.
Almost daily, news reports cover ransomware attacks involving Garmin; the world’s largest cruise line operator; the Las Vegas school district; Brown-Forman, the manufacturer of global distilled spirits brands like Jack Daniels and Finlandia; and the University of Utah, among other victims.
The attacks illustrate ransomware’s far-reaching and costly impact in terms of exposed data, disrupted operations and ransoms paid: Intruders claiming responsibility for the Brown-Forman attack, for example, said they had copied a terabyte of confidential internal network data and threatened to share it online, as part of the extortion. The cruise line operator, Carnival, experienced the compromise of guest and employee personal data. The Las Vegas school district notified employees that their Social Security numbers may have been stolen. The University of Utah reportedly arranged to pay more than $455,000 to satisfy a ransom demand, while Garmin reportedly paid $10 million after certain web sites, customer support and user application functions were blocked.
Clearly, companies are living in an age of high cyber risk. In addition to ransomware – which is targeting three of five organizations – wildly lucrative business e-mail compromises (BECs) are also behind mounting financial losses. Through BECs, adversaries create fake but authentic-looking e-mails (often disguised to look like they were sent by a high-level executive) to trick employees into wiring money into bank accounts controlled by the bad guys. Like ransomware, BECs are generating lucrative returns for fraudsters, costing U.S. businesses more than $300 million a month – up from $110 million a month in 2016, according to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
To minimize the fallout from these and additional risks, organizations are increasingly investing in cyber insurance, a global market projected to reach $28.6 billion by 2026, up from an estimated $4.85 billion two years ago, according to a forecast from Allied Market Research. Cyber insurance often covers a company’s liability for data breaches leading to the compromise or loss of customers’ Social Security numbers, credit card accounts, health records and other personally identifiable information (PII). These insurance policies can also help a targeted organization cover the costs of customer breach notifications, fraud monitoring and the restoration of personal identities.
To be sure, cyber insurance is a significant investment. Acquired and managed correctly, this insurance coverage becomes part of an integrated cyber risk posture complementing security controls and policies. However, the insurance can bring a false sense of security and lead to coverage gaps and expensive disputes with carriers, if corporate IT, legal, risk and business leaders do not collaborate closely on the following essential action steps to take before updating or acquiring new coverage:
Inventory your assets – and understand their value
The IT ecosystem is much more dynamic today. The traditional perimeter no longer applies in the global, mobile age of digital transformation. There are more remote employees, third-party partners and non-traditional connected devices. Companies operate anywhere and everywhere, which leads to negotiating and purchasing coverage based on incomplete views of true assets and risks — increasing the probability of costly disputes. A single shift like moving e-mail, storage and other applications to the cloud, for example, could get entirely overlooked – and uncovered. That’s why IT and a cross-functional team of leaders must develop a comprehensive, current view of these assets and their role in supporting business continuity, customer services and the accomplishment of strategic/bottom-line goals.
An objective, “data-first” approach proves critical in visualizing and managing coverage requirements. Cyber insurance evaluation team members need to pinpoint where the data resides, and where it travels to, i.e., which non-traditional networked devices, new partners or regional offices it touches. Even if entirely new parties are not handling the data, team members must determine if they’re storing information in new internal locations and form factors, which may make the data more susceptible to theft or exposure.
See also: The Missing Tool for Cyber Resilience
Understand what is covered, and what is not
The cybersecurity profession uses terminology like “compromise,” “intrusion” or “incident.” The insurance domain assigns very specific meaning to works like “theft,” versus “loss” and “damages.” These terms are not interchangeable, and the stakes for coverage disputes and litigation are high because so much turns on whether a cybercriminal “broke in” to steal or ransom something, for example — versus tricking a victim to e-mail the attacker sensitive files figuring in a compromise.
Therefore, it’s critical to know coverage and limits before an incident, with the leadership team mapping out plausible attack scenarios and consequences, along with a range of possible outcomes in the form of stolen data, business disruptions, brand reputation damage and customer churn. Then, team members must ensure that these outcomes are covered in the scale and scope of coverage.
Enlist a digital forensics and incident response partner before you buy
Many organizations benefit from sharing their initial cyber insurance checklists and assessments with a trusted digital forensics and incident response (DFIR) partner experienced in cyber insurance investigations and related matters. A DFIR partner familiar with your business and industry sector brings invaluable “outside eyes” on potential coverage gaps and helps ensure your team will be able to preserve files and document how an incident occurred, maximizing the likelihood that accurate claims for covered incidents are processed as quickly as possible.
Policyholders benefit from “writing-in” (specifying) the DFIR partner as the designated, go-to response firm for incidents. Otherwise, the carrier will designate a response firm from its list of default contractors – vendors that do not command the same level of knowledge about a firm’s IT ecosystem and operations. And default vendors work for the insurance provider to reduce its liability, instead of committing to the interests of the policyholder.
See also: How COVID Alters Claims Patterns
Cyber insurance is a booming part of the risk management world spurred on by current events. It can be a key part of your organization’s safety net. But, like any net, it can come with holes – holes that can amount to an unnecessarily expensive proposition for companies that fail to recognize and eliminate them. By combining complete IT asset awareness with granular attention to detail about coverage, an organization can move forward with its DFIR partner to ensure the continuous improvement of risk mitigation and containment efforts no matter how forbidding the circumstances – along with the right insurance plan for these uncertain times.