Acohido: Cyber-insurance is still nascent, yet worth a look

ka_0011-2 Pulitzer-winning journalist Byron V. Acohido is the founder and executive editor of Last Watchdog, a pioneering security webzine. One of the nation’s most respected cybersecurity and privacy experts, Acohido conceived and delivered a nationally-recognized body of work for USA Today, chronicling the frenetic evolution of cybercrime in its formative stages.

OPAQ: Some 32 percent of U.S. businesses purchased some form of cyber liability and/or data breach coverage in the last six months, compared to 29 percent in October 2016, says a survey by the Council of Insurance Agents and Brokers (CIAB). Do you think this growth will continue—and why?

BA: Demand for cyber insurance absolutely will increase at a healthy clip for the foreseeable future. That’s because the value of business data and intellectual property today far outstrips the value of the physical plant. Think about it: we can do astounding things with cloud computing and mobile devices. And yet the business networks that support Internet-centric commerce remain chock full of security holes. Criminals get this, and will continue to take full advantage. Meanwhile, businesses are scrambling to figure out how to deal with data theft, network disruptions and cyber fraud. And we are in the very earliest stages of dialing in insurance to help them offset these emerging exposures.

OPAQ: There are a number of barriers for purchasers of cyber insurance, including: lack of standardization on policies and pricing, difficulties determining risk, difficulty showing attribution when a breach or incident occurs, and so on. Thoughts on these and how should the insurance industry address them?

BA: There’s nothing, really, stopping the industry from taking the first step of standardizing the basic terminology to use in cyber policies. Right now there is none. Standardized language would pave the way for underwriters to begin more assertively partnering with cybersecurity vendors to come up with innovations to measure cyber risks. Insurers could become much more proactive about incentivizing companies to embrace more rigorous security policies and practices. As the pool of lower-risk policyholders grows, the industry could then begin to extend policies to cover specific cyber exposures that today are not routinely covered.

OPAQ: There is risk in buying cyber insurance in terms of mitigating losses. For instance, Target received an estimated $100 million in coverage, which didn’t even cover half of the $290 million it lost. How can companies avoid this sort of outcome?

BA: No company should be relying solely on insurance to eliminate all, or even most, cyber exposures. In the current environment, where hackers probe business networks 24 by 7 by 365, network security should be a top priority for all organizations. It’s a cliché, but true, that there is no silver bullet. The use of layered security technologies remains vital; no less so continually refining and enforcing policies and training employees. A cyber policy can then be thoughtfully purchased to offset the remaining risk.

OPAQ: Given these barriers, and any tips for CSOs seeking carrier quotes?

BA: It’s an interesting time to go shopping for cyber coverage. Even though the insurance industry has left many things undone, there is wide recognition of the pent-up demand. The result is that there are many companies competing aggressively to sell policies. In a sense, it’s a buyers’ market. Numerous options are available to get some level of cyber coverage from somebody. The problem, of course, is that the devil is in the fine print. So it is important to find a knowledgeable, trustworthy agent to guide you through the due diligence process.

OPAQ: Finally, what could security vendors be doing to help their customers with cyber insurance – a.k.a. data collection, navigating insurance decisions, partnering, etc.?

BA: The path forward for security vendors, at this point, seems to be much the same as insurance buyers – become knowledgeable about this emerging market and align yourself with smart, trustworthy partners. A few pioneering partnerships between insurance companies and security vendors are out there, and I expect this trend to accelerate over the next few years.