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Ransomware Settlements: Pros and Cons of Cyber Insurance

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From an irritation to a global threat—ransomware has evolved to become a real problem. In some cases, an attack can prove devastatingly fatal.

An Alabama hospital suffered a ransomware attack in 2019, and a baby died as a result. According to a lawsuit filed by the baby’s mother, the child suffered severe brain injury because its umbilical cord was wrapped around its neck. The problem could have been prevented if key computer systems had been up and running, allowing the hospital to perform tests that would’ve detected the issue in time. But because of the attack, the hospital’s computer systems were down and the tests weren’t performed. The baby died nine months later.    

In 2020, a German woman suffering from an aortic aneurysm died because the university hospital close by had been hit by a ransomware attack and couldn’t accept her. She was taken to another hospital 32 kilometers away, and the woman’s treatment was delayed by an hour.

Cyber Insurance: What You Need to Know

Ransomware attacks are increasing in frequency and sophistication. And IT teams have long accepted that getting hit by a ransomware attack is no longer a question of if but when. As a result, ransom demands and payments are continuing to go up. Palo Alto’s 2022 Unit 42 Ransomware Threat Report found that the average ransom demanded in 2021 was $2.2 million, which was 144% higher than 2020’s average of $900,000.

It’s no wonder organizations are getting cyber insurance to insulate themselves from the potentially crippling financial fallout. But what is cyber insurance, exactly? The quickest way to paint a comprehensive picture of cyber insurance is to break down what it covers and what it doesn’t.

What Does Cyber Insurance Cover?

Cyber insurance covers financial damage stemming directly from a cyber attack, such as in the following:

What Does Cyber Insurance Not Cover?

Cyber insurance is, in many ways, like other types of insurance—there are certain costs it won’t cover, such as those resulting from: 

Pros of Cyber Insurance

No organization is immune to a cyber attack, and cyber insurance is a risk management strategy that many companies have come to rely on for the following reasons:

Cons of Cyber Insurance

Cyber insurance can cushion organizations from the financial impact of a cyber attack, but there are also some drawbacks to consider:

Can Insurers Deny You Coverage?

The short answer is yes, they certainly can.

And that’s primarily due to the multimillion-dollar payouts and the rising number of attacks. So even if you have the resources to pay for cyber liability insurance, there’s no certainty you’ll get one.

In many cases, insurers will require prospects to put what they consider essential measures in place before they’d even sit down to discuss coverage. Depending on the insurer and the company being insured, such measures may include, among others, multifactor authentication, endpoint detection and response (EDR), secure backup systems, privileged access management (PAM), and email filtering and web security.

Essential Cybersecurity Measures Your Organization Needs, Whether You Get Cyber Insurance or Not

In addition to getting insurance—or even if you choose not to—there are some things you can do to protect your company and make it harder for hackers to infiltrate your organization:

Choosing the Right Cyber Insurance for Your Business

If you decide to buy cyber insurance to further shield your company from the negative consequences of a cyber attack, take the time to consider the options available to you. Different insurers offer different coverage, so make sure you understand what is and what’s not included. Seek the help of an experienced broker to help you determine what’s right for your organization. In addition, only do business with a reputable cyber insurance vendor.

And perhaps most importantly, even after securing cyber liability insurance, continue to exercise caution. By putting robust security systems in place, you can protect business systems, customer information, and even the lives of those you serve.

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