The cost of a data breach has risen to over 4 million dollars, and ransomware remediation costs keep skyrocketing. Between 2020 and 2021, the price to recover from ransomware rose by 143% to $1.85 million.
These costs can drive smaller companies out of business in many cases, which has led to a rise in the popularity of cybersecurity insurance. This type of business liability insurance protects companies against devastating losses that can happen in the wake of a cyberattack.
Cybersecurity liability insurance is becoming just as vital as carrying property and vehicle insurance in today’s threat climate.
What Does Cybersecurity Insurance Pay?
These types of policies will typically offer both first-party coverage and third-party coverage. One is designed to pay you directly for business losses due to a cybersecurity incident. The other protects you from costs relating to payments to your customers that may have been impacted by a breach or regulatory agencies.
Here are some examples of what this type of insurance can cover.
First-party cybersecurity policy coverage:
- IT-related costs to remove malware
- Recovery and replacement cost for lost or stolen data
- Customer notification call center services
- Lost income due to downtime
- Crisis management costs
- Cost of paying a ransomware ransom demand
- Forensic services for breach investigation
- Compliance fines and penalties
Third-party cybersecurity policy coverage:
- Reparation payments to consumers impacted by the breach
- Claims and settlement expenses from related lawsuits
- Costs for providing identity theft protection services to those impacted
- Losses related to defamation and copyright infringement
- Costs for litigation and responding to regulatory inquiries
- Accounting costs
- Other damages or judgments that were paid as a result of the cybersecurity incident
Requirements to Obtain Cybersecurity Liability Insurance Are Getting More Stringent
Cybersecurity liability insurance is still fairly new in the insurance industry, just becoming mainstream in the last 10-15 years. Insurance carriers are still figuring out the best balance between premiums versus how much is paid out in claims.
Between 2019 and 2020, U.S. cyber insurance carriers saw an increase in direct written premiums of 29.1% to $4.1 billion. Yet, some of the top 20 groups in the market reported direct loss ratios as high as 114% (meaning they were losing money).
To adjust for these losses, carriers realize they need to raise the client requirements to obtain cybersecurity insurance. Therefore, carriers will no longer accept applicants with a poor record of cybersecurity hygiene.
One of the main requirements being added for companies to obtain cybersecurity insurance is the use of multifactor authentication (MFA) for identity and access management.
Reasons MFA Implementation is Becoming a Requirement for Getting Cyber Coverage
Credential Theft Has Become the #1 Cause of Data Breaches
When looking to reduce losses for cybersecurity policies, carriers want to mitigate the highest risk. This turns out to be weak passwords and lax access security.
According to IBM Security’s latest Cost of a Data Breach Report, credential theft has risen to become the main cause of data breaches globally. Thus, access management using MFA is a way to mitigate that risk.
Multi-Factor Authentication is Proven to Be Effective
MFA has a solid track record of successfully thwarting fraudulent sign-in attempts to company accounts and systems. This is why it has become one of the main tenets of a zero-trust cybersecurity approach.
According to a study from Microsoft, MFA can block 99.9% of fraudulent account takeover attempts.
Most Business Data & Processes Have Moved to the Cloud
Much of the data and software that companies use to operate their businesses have moved from on-premises hardware to cloud environments.
In these types of environments, the easiest way to breach the system is through a legitimate login, which is why cybercriminals are heavily targeting the theft of passwords in phishing campaigns.
MFA directly targets this type of attack, providing the additional access verification needed to keep out intruders, even if they have the user’s password.
Insurers Can’t Continue Losing Money on Cybersecurity Insurance Policies
The companies that issue cybersecurity insurance policies cannot continue losing money on the deal due to lax security by policyholders. Thus, adding a requirement for MFA implementation is a big step toward reducing the potential for claims and, at the same time keeping clients more secure.
How Tools4ever Can Help You Meet Cybersecurity Insurance Requirements
Identity and access management is vital in today’s business world and threat environment. Our HelloID account provisioning and management tool make implementing multifactor authentication seamless.
It automates processes between your systems and can be used with SSO (single sign-on) solutions to help ensure that MFA does not slow your team down.
Book a Live Demo of Our Account Provisioning & Identity Management System Today!
Improve security, meet insurance policy standards, and reduce the complexity of your account management with an automated and easy-to-use solution.
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