When you think about Cyber Insurance, you would most likely think immediately about cyber attacks and data breaches brought on maliciously by cyber criminals. But what about when your system or network fails due to human error and that shuts down your entire operation? Continue reading as we delve through the differences of coverages and the opportunities out there to protect your business from both scenarios.
Network Attacks
A standard Cyber Insurance policy will have coverage for Network Attacks. This specifically addresses damages and losses resulting from deliberate malicious actions targeting a network. These threats often involve:
- Cyberattacks: Hacking attempts, ransomware, or malware infections that compromise a network’s functionality.
- Data Breaches: Theft or exposure of sensitive customer or proprietary information due to unauthorised access.
- DDoS Attacks (Distributed Denial of Service): Overwhelming a system with traffic to render it unusable.
- Phishing and Social Engineering Attacks: Techniques used to gain access to systems by exploiting human vulnerabilities.
Example: A medical IoT device company falls victim to a ransomware attack that locks its production systems, forcing operations to halt until a ransom is paid or the systems are restored.
The Cyber Insurance policy will generally provide the following in regards to the cyber attack; incident response services, data restoration services and may pay out the extortion costs. If there was a data breach, the policy will cover the legal defence costs, investigation costs and may cover the fines and penalties. If the business was interrupted as a result of the cyber attack, there may also be recovery or loss of profits during that period of downtime.
Network Failure
If you already have a Cyber Insurance policy in place for your company, take a look at the wording and see if it also includes Network Failure coverage. This type of cyber coverage is designed to address issues stemming from the unavailability or malfunction of a network that is not necessarily caused by malicious intent. These incidents can include:
- System Outages: Unplanned disruptions to IT systems due to software glitches, hardware failures, or configuration errors.
- Third-Party Service Provider Downtime: Situations where a business’s operations are disrupted due to failures at a cloud provider, payment processor, or other critical vendor.
- Human Errors: Mistakes by employees or contractors that lead to system malfunctions or unintentional downtime.
- Natural Disasters: Events such as floods, fires, or earthquakes that physically damage IT infrastructure.
Example: An E-commerce company experiences significant downtime during the holiday season because of a server crash caused by an internal IT error. Network Failure coverage can compensate the company for lost income and additional expenses incurred during the downtime.
Companies that rely heavily on their networks and IT infrastructure for day-to-day operations benefit the most from having Network Failure coverage as part of their Cyber Insurance policy. These include E-commerce platforms (as mentioned above) who depend on their websites and payment processing systems to be always online and available for sales. A network outage, even for a few hours can lead to massive revenue losses, particularly during peak shopping seasons. Similarly, SaaS companies are expected to deliver high uptime guarantees to clients. Any failure in their services directly affects their clients’ businesses. If an outage results in a financial loss for their clients, the clients may even sue the company.
Another reason for considering Network Failure coverage is if you want coverage for Voluntary Shut Down. This is when companies might need to proactively shut down their systems to mitigate the potential fallout from cyber incidents. For example, you detect suspicious activity, such as malware infiltration. It hasn’t yet caused damage but could escalate if left unchecked. You voluntarily shut down the network to prevent the malware from spreading across to the point-of-sale systems. Having Voluntary Shut Down coverage in your Cyber Insurance policy could compensate for the operational downtime and revenue loss.
Cyber Insurance contains many useful coverages for various scenarios. The more complex or dependent your company is on its networks and IT infrastructure, the more the need for a comprehensive Cyber Insurance policy. Discussing your particular setup and risks with a specialty insurance broker like Anapi is important to make sure you have the right coverage in place. Especially at the different stages of business growth, where the level of risk can vary as you move from start-up to scale-up and beyond.
