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Does Cyber Insurance Cost Too Much?

We often hear that cost can make cyber insurance a non-starter for businesses. We get it; broad coverage comes at a price given the value of services provided with a policy these days.

So, CFC has listed below the 5 key reasons a cyber insurance policy, is worth the financial investment.

Cyber is a business’ largest exposure
We’re in a digital age and businesses no longer rely on paper trails and filing cabinets. This digital reliance has shifted a business’ assets from tangible to intangible, making them wildly accessible and opening even the smallest of businesses to a whole new era of risk.

Subsequently, most companies today state that cyber risk is in their top three, if not their number one business risk given their reliance on technology. Since the frequency of loss is that much greater for a cyber event than traditional perils, such as a fire – it makes sense that the cost of cyber insurance today will mirror a business’ largest exposure.

CFC has created a cyber risk heat map, which explains the varying levels by industry. Hint, nearly no business is safe!

Premiums are a fraction of the cost compared to a cyber claim
The price of cyber insurance may seem higher than expected given many still consider it a discretionary purchase, but when you compare the thousands, hundreds of thousands, or even millions in costs that cyberattacks can incur for business, it’s an easy decision to make.

And the severity of those claims continues to rise. According to the latest Coveware report, it’s been noted that fewer victims are paying ransomware demands, so threat actors are demanding more money to compensate for the lower hit rate, making individual claims more expensive.

This lower hit rate on ransomware has also meant hackers are pivoting back to previous attack techniques, with the likes of business email compromise attacks showing an increase of 147% across the second half of 2022 (for SME businesses).

A good cyber policy should offer proactive protection from attacks
At CFC, from the minute the policy is bound, their cyber security team works around the clock to protect businesses against cyber-attacks.

This is a proactive, protective service that identifies potential threats using insights from a variety of sources, including public and private threat intelligence feeds that go well beyond the usual outside-in scanning tools available to insurers. If a cyber security issue is found, their team will reach out through their Response app to work with a potentially compromised business, to eliminate the threat before it can cause harm.

To pay for this level of monitoring externally, a business would need multiple providers, all individually costing upwards of thousands every year. Whereas, all of this work is done for free, as part of the standalone CFC cyber policy, as well as expert incident response and recovery.

Expert incident response and recovery
One of the other critical elements of a cyber policy is the availability of in-house cyber incident response. At CFC, their team of cyber threat analysts, digital forensic specialists and incident responders, CFC Response, is available 24/7 to triage incidents, contain threats, and repair networks if a cyber incident occurs.

Cyber policies cover a lot
A good, stand-alone cyber policy, such as a CFC cyber policy, includes comprehensive coverage.

Many small businesses do not have access to enterprise-grade security teams, threat intelligence feeds that can inform them of whether they are listed on a threat actor’s target list, or access to a multi-disciplinary team of experts who know how to respond to cyber-attacks and compliment existing IT personnel.

Equally, should the worst happen, cyber insurance policies cover cyber incident response costs, including IT forensics, legal, breach notification and crisis communications to cybercrime costs that include social engineering, theft of personal funds and cyber extortion.

All told, this can cost anywhere from thousands to hundreds of thousands, and there is no limit to the range of support required during a cyber incident. CFC’s security team estimates that the average downtime following a ransomware attack can be up to 2-3 weeks, and that’s only with the expert assistance of a cyber incident response team provided by an insurer. With a broad policy, the insured can focus on getting their business back up and running, rather than worrying about what will and won’t be covered by their insurer.

It is estimated that that cyber-attacks will cost the globe $8 trillion dollars in 2023. Yet, we estimate, only less than 20% of businesses have taken out a cyber insurance policy as of today. Cyber insurers are not just there to step in after an attack has taken place, ready to pay the many external teams a business needed to pull in to recover.  Instead, coverage from a cyber insurer like CFC protects and prevents attacks on businesses from the minute they bind a policy.

Cyber insurance is not expensive, cyberattacks are. And with the right cyber insurance product, it should be the easiest purchase a business has ever made to cover its largest exposure.

Source: www.cfcunderwriting.com


How to Stay Safe Online

The last couple of years has seen a surge in cyber events affecting businesses of all sizes. With the growing volume and sophistication of online threats like viruses, ransomware, and phishing scams, it’s important to know the proper practices to stay safe online.

From paying attention to browser warnings to being mindful of app permissions, a few small changes can make a big difference when it comes to cybersecurity. That’s why CFC’s in-house cyber claims and incident response team has assembled this handy infographic, which contains oodles of easy, actionable tips on things you can do – today – to become more secure.

Click here to download the full infographic below.

Source: www.cfcunderwriting.com


Third-party Downtime Leads to First-party Business Interruption Loss

An HR service provider lost contracts due to a cyber attack suffered by one of its supply chain partners.

Over the past two decades, technology has transformed the way businesses operate, and most now depend on their computer systems in one way or another. Rather than having to deal with everything in-house, many businesses choose to outsource elements of their IT infrastructure to third party providers, whether that be in the form of website hosting, data storage or application level services.

In many cases, outsourcing IT can prove to be a more efficient and cost-effective way of doing things, with businesses benefiting from the expertise of their third-party providers. However, outsourcing is not without risks. In a cyber insurance context, dependent business interruption describes a situation in which a third-party organization that supplies a policyholder with goods or services is affected by unexpected downtime as a result of a cyber event or system failure. Even though the policyholder’s computer systems may not be directly affected by the incident, the loss of the goods or services provided by the third-party can still have a major impact on the insured business’s ability to operate effectively. This means that a business can still suffer a business interruption loss even when its computer systems are unaffected.

One of our policyholders affected by this type of loss was a small company providing outsourced human resources services to a variety of different businesses. The organization provides a range of services to its customers, including payroll processing, employee benefits and health insurance and assistance with compliance and regulatory issues.

Third-party downtime, first-party problems

The business provides its payroll processing services through an online application, which in turn is owned and hosted by a third-party provider. Their customers gain access to the payroll application through a link on their website, which then takes them through to a landing page hosted by the third-party where they can then log in to the application. Once these customers log in to the application, they are effectively operating on the third party’s computer systems, even though their contracts are with our policyholder.

The issue began when the third party responsible for providing the payroll processing application was hit by a ransomware attack. This ransomware attack managed to encrypt the servers hosting the application, which meant that neither our policyholder nor its customers could gain access to the application. As the application was hosted by this third-party, however, our policyholder was powerless to control the situation and had to rely on the application provider to respond to the incident. The only thing they could do was to explain to its customers that the application was unavailable due to a cyber attack affecting the application provider and that regular status updates would be provided.

In the meantime, the third-party provider went about trying to deal with the issue by decrypting the affected servers, removing the ransomware and returning the application to its normal functionality. After three days of downtime, it looked as though the issue had been resolved and the insured and its customers were able to login to the application once again. However, this breakthrough proved to be short-lived. During the encryption process, the ransomware had damaged the application and impaired its underlying functionality. This meant that while customers were able to log into the application and view employee data, they were unable to update the data or process any payments.

To remedy the problems caused by the ransomware, the application was taken down once more and it was only after a further five days of downtime that the application was fully restored. To make matters worse, the downtime occurred at the end of the calendar month, a time during which most of our policyholder’s customers would ordinarily pay their employees.

Frustrated customers lead to lost contracts

With the payroll processing application rendered inaccessible as a result of the ransomware attack, some of their customers were unable to pay their employees on time. Although they were able to pay their employees once the application was up and running again, the delay in payment was a source of great frustration for both the businesses and employees affected. As the customers that were impacted only had contracts with the insured rather than the application provider, it was the insured that bore the brunt of this anger.

Indeed, eight customers chose to cancel their contracts and take their business elsewhere. All of these customers sent individual letters or emails to our policyholder, explaining their reasons for cancelling. In each case, these cancellations came down to a combination of two factors: firstly, the delay in paying employees as a result of the ransomware attack and, secondly, a concern that the ransomware attack meant that sensitive data stored on the payroll application might not be secure. This served as confirmation that these customers were lost as a result of the cyber attack as opposed to regular customer churn.

The total value of these annual contracts came to $72,554 and despite the insured’s attempts to placate these clients and win them back, unfortunately none of these customers decided to reinstate their contracts, meaning that over the course of the 12-month indemnity period, the insured suffered a business interruption loss of $72,554.

While these losses are potentially recoverable from the application provider, this can be a costly and lengthy process and in the meantime the insured would suffer from cashflow issues due to the drop-off in income. Fortunately, however, the income loss from these cancelled contracts was covered under the dependent business interruption section of the company’s cyber policy with CFC, which covers business interruption losses arising as a result of a cyber event or system failure at a policyholder’s supply chain partner.

Dependent BI and other takeaways

This claim highlights a few key points. Firstly, it underscores the importance of having dependent business interruption cover in a cyber insurance policy. Some cyber insurers will only provide cover for business interruption losses as a result of cyber events that directly affect an insured’s computer systems. However, in this instance, at no point was the insured’s computer systems directly impacted by the ransomware – it was the application provider’s computer systems that were affected – and yet it still resulted in a sizable business interruption loss. By having dependent business interruption cover in place, the business was able to fully recover its financial loss.

Secondly, it illustrates the value of longer indemnity periods. Many cyber insurers only offer 3-6-month indemnity periods as standard. However, this ignores the fact that the financial impact of a cyber event can be felt for much longer than a 3-6-month indemnity period would allow for. In this case, the cancellation of annual contracts meant that for each cancelled contract, the insured lost 12 months’ worth of income. By having a 12-month indemnity period in place, they were able to reclaim quadruple the amount that they would have been able to claim on a policy with a 3-month indemnity period and double the amount they would have been able to claim under a policy with a 6- month indemnity period.

Finally, it highlights that businesses that receive their income on a contractual basis could be more exposed to business interruption losses, as the cancellation of monthly or annual contracts could very quickly result in sizable financial losses being incurred. Accordingly, businesses that receive their revenue in this way should consider factoring this in when selecting an appropriate limit for their cyber policy.

Source: www.cfcunderwriting.com

 


It’s Not Too Late, Start Your Cyber Resolution Today

CFC has put together a few top cyber-related resolutions for this year.  Check them out and have a secure 2019!

  1. I will change all default passwords on my personal and work devices.
  2. I will regularly check for updates to the operating systems of my laptop, computer and mobile phone.
  3. I will install strong anti-virus software and keep it updated.
  4. I will think twice before clicking on unknown links or attachments in emails.
  5. I will authorize payments to new transfer partners via telephone to minimize risk of fraud.
  6. I will not share sensitive information on social media that could be used against me in phishing attacks.
  7. I will back up my entire system at least once a week on an external hard drive.
  8. I will encrypt my mobile phone and all of my other devices.
  9. I will talk to my kids (or parents) about how to stay safe online.
  10. In the event that resolutions 1-9 fail, I’ll have a cyber insurance policy in place to save the day!

Source: www.cfcunderwriting.com


Critical Cyber Exploits Affect Nearly All Computers

Cyber security researchers recently announced the discovery of two major security flaws that could allow hackers to bypass regular security measures and obtain normally inaccessible data. The flaws, referred to as Meltdown and Spectre, are both caused by design flaws found in nearly all modern processors. These vulnerabilities can be exploited to access all of the data found in personal computers, servers, cloud computing services and mobile devices.

Because Meltdown and Spectre are both caused by design flaws, experts believe that they will be harder to fix than traditional security exploits. Additionally, software patches that have already been released to help address the vulnerabilities can cause computer systems to slow down significantly, which may impact their ability to perform regular tasks.

Researchers believe that Meltdown and Spectre may be limited to processors manufactured by different companies, but also warn that the design flaws that contribute to Meltdown and Spectre have been present for years. Here are some key details about each flaw:

  • Meltdown: This flaw can be used to break down the security barriers between a device’s applications and operating system in order to access all of the device’s data. Meltdown can be used to access desktop, laptop, server and cloud computer systems, and can even be used to steal data from multiple users who share one device. Although researchers have only been able to verify that Meltdown affects processors made by Intel, other processors may also be affected. Many software developers have already released updates that prevent hackers from exploiting Meltdown.
  • Spectre: This flaw can be used to break down the security barriers between a device’s different applications and access sensitive data like passwords, photos and documents, even if those applications adhere to regular security checks. Spectre affects almost every type of computer system, including computers, servers and smartphones. Additionally, researchers have confirmed that the design flaw that enables Spectre is present in Intel, AMD and ARM processors that are used by nearly every computer and mobile device. Software developers are currently working on a patch to prevent the exploitation of Spectre, but some experts believe that future processors may have to be redesigned in order to fix the vulnerability.

When Meltdown and Spectre were originally discovered in 2017, researchers immediately reported them to major hardware and software companies so work on security fixes could begin without alerting hackers. As a result, services and applications offered by companies like Microsoft, Google, Apple and Amazon have already been updated to help defend against the flaws. However, you shouldn’t rely solely on a software patch to protect against these vulnerabilities. Here are some steps you can take to protect your computer systems and devices from Meltdown and Spectre:

  • Update all of your devices immediately, and check for new updates regularly. You should also encourage your friends, family members and co-workers to do the same.
  • Contact any cloud service providers and third-party vendors you use to ensure that they are protected against Meltdown and Spectre. Cloud services and computer servers are especially vulnerable to the exploits, as they often host multiple customers on a single device.
  • Install anti-virus and firewall systems to protect against regular malware. Researchers believe that hackers need to gain access to a device in order to exploit Meltdown or Spectre, so keeping your devices free of malware can help prevent data theft.

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